Broadcom sends VMware to record revenue, margins, as most big customers sign for private cloud bundles Broadcom’s takeover of VMware continues to deliver strong revenue and margin growth, and the company expects demand for AI hardware will do likewise in coming years. The chips ’n’ code company on Thursday announced its Q2 2025 results, which saw revenue grow 20 percent year over year to reach $15 billion. Net income surged 124 …
Greed will only get them so far.
Once those 8,700 customers who signed up to them get their ducks in a row, they will dwindle. And when they dwindle, the other customers will take the burden of increased costs from VMware.
I'm minded of the fat fella from Monty Python's Meaning Of Life. Sooner or later they'll pop from their gluttony. When you think of it, 2,300 customers have decided not to do it. So it shows that not everyone is on board with it.
1) I won't be the first one to be confused by a decimal point, and I won't be the last. A big number is a big number when it's compared to a small one.
2) I think given that VMware are only willing to give you a renewal price within 30 days of your current agreement expiring, I'd say I'd have a good idea about their intent.
I doubt 13% of their top 10k customers could jump ship so quickly.
If your that big you’ve got lots of licenses & presumably using them.
Planning to move to something else like public or private cloud will take months, executing the move will take many months too. I’d say minimum 24 months to move off VMware but more like at least 3 years for a top 10k customer & even then they’d likely be breaking things to get it done.
If you’ve not renewed into the new subscription offer then you’re at risk of unpatched vulnerabilities from your perpetually licensed versions that are no longer under vendor support unless you have a specific contract that includes support for perpetual versions.
If your a regulated industry then you likely need to demonstrate your running vendor supported and patched systems etc, the fines & potential for hacking attacks resulting in lost business would outweigh the VMware price increases.
In short, 87% have moved as they had to, 13% haven’t had to yet & the vast majority of them will have no choice when the time comes.
The 13% who haven't are very likely the ones who had time on their side.
Some of them will have had enough time to leave.
I estimate by the end of this cycle about 10% of the (former) top 10k will have moved their estates elsewhere, and by the next renewal cycle, about 95% will have left.
But the Broadcom execs won't care, because they'll have already banked their bonuses and moved elsewhere - despite the fact their decisions are already making a loss.
Many mid level managers in corporate IT departments only know VMWare. Their entire career resides on the technology. They will fight tooth and nail to renew the VMware contracts, as that keeps them in a job.
Companies need to realise that getting rid of VMware from their organisation is not a technology challenge, it is an HR challenge….
Customers are using whichever solutions works best for them. Choosing your tools based on emotion is foolish.
Companies are inherently selfish.
I understand it is unfathomable for some that many customers still see Vmware Vsphere as the best in class virtualization solution - because technically it is so (perhaps Tanzu not withstanding).
companies are inherently *greedy* in the corporate West and elsewhere
The "limited company" concept is out of date in an era where companies and their management appear to carry *no* personal liability when things go rong, yet are seemingly allowed unlimited greed for the whole time.
In an era when `work' can be outsourced trivially, what happens to accountabilty and responsibility?
The impact on product/service quality and vfm is already widely visible.
"Net income surged 124 percent year over year to $4.95 billion."
That is ~$2.7B a year more. Just 22 years to pay off the $61B they paid for VMware. That's just under 5% ROI. [1]
Now, the $61B question is, will revenue keep "surging" long enough to repay the acquisition price?
Personally, I strongly suspect VMware will not surge another decade, or even another 5 years. Especially as Broadcom does not seem to invest much in VMware R&D, if you take out the investment in innovative extortion marketing.
[1] I assume the cash stream of VMware was already incorporated in the acquisition price.
"Just 22 years to pay off the $61B they paid for VMware."
Cash terms yes. Perhaps better to consider whether they make a return on the $61bn. Broadcom's weighted cost of capital is 10.8%. So the $61B needs to have EBIT of $6.6bn a year merely to wash its face. I'd suggest that as a notional standalone with the Broadcomm price hikes, VMWare would make EBIT of around $3bn a year, in which case Broadcomm have destroyed €3.6bn of shareholder value this year.
By my crude calculations, adding the annual value destruction to invested capital*, then they need to grow VWare EBIT by an average of 7% per year to make a return, and that means by about year 8 VMWare EBIT exceeds the cost of capital even with value losses in the first 7 years. That's a long wait, and assumes that all those customers are up for annual inflation-busting price rises. At 6% EBIT growth or below then progressively more value gets destroyed over time and there's never a return on the purchase price.
So they COULD still make it worthwhile, but on a balance of probabilities it is what it looks like: Broadcomm overpaid for VMWare, and I'd guess their shareholders can wave goodbye to at least half of that money.
"strongly suspect VMware will not surge another decade, or even another 5 years. Especially as Broadcom does not seem to invest much in VMware R&D"
Lack of R&D investment is usually the downfall of any successful company that is taken over. Innovation makes a company successful and continued innovation is required to remain successful. VMWare will need to show how it is evolving to support AI related workloads and infrastructure in order to stay relevant.
Big companies never innovate. Senior corporate managers won't support anything that's small scale "because it is insignificant, a waste of my time", and there's no innovation that instantly scales to make a difference for a megacorp. If Broadcom had bought VMWare back in 2004 they'd have had the company for around $630m, instead they waited twenty years for it to grow nice and big, and then they blew a staggering $61bn on it. You see the same with many other sectors, and I've personally heard directors say "don't bring me this rubbish, if it's not generating EBITDA of <unfeasible>million then I'm not getting out of bed".
That's why the Broadcom/VMWare strategy is to rinse the customers. They have no intention of investing, they can't innovate at scale, so the only other option is to exploit the fact that dropping VMWare is impractical for their similarly uninovative corporate clientele.
That's why the Broadcom/VMWare strategy is to rinse the customers. They have no intention of investing, they can't innovate at scale, so the only other option is to exploit the fact that dropping VMWare is impractical for their similarly uninovative corporate clientele.
Broadcom have a history of buying technology companies that are crucial to their customers.
CA made a name for themselves in the mainframe space keeping older hardware & software running. I believe that's what attracted Broadcom to them. customers had already chosen to keep the old stuff & pay CA, Broadcom could just up fee's by 30% and most customers had no choice but to pony up & pay CA more if they wanted to migrate away. Broadcom could not loose.
Folks, this goes to show you that once again once you tie yourself to a monopoly you will be held by the nuts. History shows this over and over and yet here we are a company taken over and making even more money. People love to be abused and come back for more even when shown the truth.
"VMware is a monopoly, as only one business has control over such proprietary software."
Well that's a rather dim-witted comment.
Yes, VMware has monopoly over VMware products.
Toyota has monopoly over Toyota products.
GNU Enjoyer has monopoly over the Gnu Enjoyer handle on this forum.
In their respective markets - virtualisation, automobiles, silly comments - none has a monopoly.
"There is other VM software that is not VMware, but to use that requires escaping from the VMware monopoly by breaking all of the handcuffs that have been affixed."
What handcuffs are those? Moving away from VMware is likely just as simple/complex undertaking as moving away from KVM.
"Broadcom sends VMware to record revenue, margins, as most big customers sign for private cloud bundles"
For now at least and some of the idiots wont even start designing out so there will be a level of business on what will become a stagnant technology for a long time. Mainframe Mark 2.0? It'll just get more painful as clients drift away and Broadcom tries to maintain revenue.
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