Financial Success for Broadcom’s VMware Strategy, But Mixed Customer Reception

Summary:

1. In the third quarter of 2025, infrastructure software revenues, driven by VMware, increased by 17% to $6.8 billion due to new subscription-based licensing.
2. Operating margins for Broadcom’s infrastructure software division reached 77%, higher than ever achieved by VMware before the acquisition.
3. The focus is now on innovation, delivering value to clients, and driving returns for investors, with a goal to make the fully private cloud a must-have for enterprises.

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   Title:
   Broadcom’s Infrastructure Software Division Sees Record Growth in Operating Margins

   Article:

   In the third quarter of 2025, infrastructure software revenues saw a significant increase, reaching $6.8 billion, driven largely by VMware’s new subscription-based licensing model. This resulted in a 17% growth compared to the same quarter in the previous year. The shift to subscription-based licensing has proven to yield better operating margins for the company.

   Broadcom’s infrastructure software division has seen a remarkable improvement in operating margins since the acquisition of VMware. Operating margins have soared to 77%, a substantial increase from the 13% to 22% range in the years leading up to the acquisition. This marks a significant milestone for VMware, with operating margins now higher than ever achieved before and surpassing industry averages.

   Steven Dickens, CEO and principal analyst at HyperFRAME Research, believes that VMware is now more focused and streamlined than ever before. The company is now dedicated to innovation, delivering value to clients, and generating returns for investors. Dickens is optimistic about the long-term prospects for Broadcom, particularly for the VMware business unit.

   Broadcom’s efforts to shift customers to VMware Cloud Foundation have been successful, with over 90% of VMware’s largest customers making the transition. The introduction of bundled subscriptions has provided customers with access to a unified private cloud platform, enhancing the overall user experience. Looking ahead to 2026, Broadcom is focused on increasing adoption and ensuring customer retention in the fully private cloud environment.

   Jevin Jensen, an IDC analyst, highlights the importance of making the private cloud platform a necessity for enterprises. With the proven stickiness of the VMware hypervisor, the goal now is to make the entire private cloud bundle indispensable for businesses. The focus is on driving adoption and creating a seamless user experience for customers in the evolving landscape of infrastructure software.