Broadcom’s acquisition of VMware has proven to be a financial success, with the company reporting significant growth after a majority of its top 10,000 customers opted to acquire its Cloud Foundation stack. For the quarter ended February 2nd, Broadcom’s first in FY 2025, revenue reached $14.92 billion, marking a 25 percent year-on-year increase. Net income surged by 315 percent to $5.5 billion compared to Q1 2024.
VMware’s revenue is now integrated into Broadcom’s infrastructure software business unit, which reported $6.7 billion in revenue for Q1, up from $4.55 billion in the same quarter last year. While direct comparisons are not straightforward due to Broadcom owning VMware for most of Q1 2024, the rise from $1.97 billion in software revenue in Q4 2023 to $6.7 billion in Q1 2025 suggests VMware’s significant contribution.
Broadcom attributes this growth to its strategy of selling bundled subscriptions, primarily VMware Cloud Foundation (VCF), which are more costly than previous licensing models. CEO Hock Tan revealed that approximately 70 percent of its largest 10,000 customers have adopted VCF. Additionally, cost-cutting measures at VMware have improved operating margins from 16 percent in its final standalone quarter to 76 percent in Q1 under Broadcom.
In other developments, Broadcom announced that two additional hyperscalers have engaged the company to create custom AI accelerators, bringing the total to four. Broadcom is also working on the industry’s first two-nanometer AI XPU packaging and plans to deliver clusters running up to a million accelerators by 2027. Semiconductor revenue grew by 11 percent year-on-year to $8.2 billion, with AI-related products contributing $4.1 billion, surpassing forecasts.
Despite these successes, Broadcom’s share price has fallen by about 25 percent this year, partly due to market concerns over AI-related stocks and potential impacts of tariffs introduced by the Trump administration. However, after-hours trading following the earnings announcement saw the stock price jump from around $180 to settle at just over $200 per share.
— news from The Register