Broadcom Plays Defense At VMware Explore 2025

US President Donald Trump jokes with Broadcom CEO Hock Tan (Photo credit NICHOLAS KAMM/AFP via Getty Images)

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When Broadcom completed its $69 billion acquisition of VMware, the company promised predictable growth from one of the most entrenched platforms in enterprise IT. Less than two years later, the numbers validate that bet.

Broadcom’s infrastructure software revenue, which VMware largely drives, increased 25% year-over-year in Broadcom’s most recent quarter, reaching $6.6 billion. But beneath the headline growth lies a story that has less to do with customer expansion and more to do with how Broadcom has reshaped the economics of VMware licensing.

At the same time, Broadcom’s VMware business faces increasing competition. While Nutanix was an early competitor, and continues to grow at the expense of Broadcom, it’s no longer alone in the market.

Behind Broadcom’s VMware Revenue Gains

The growth story Broadcom itself tells is one less focused on customer growth in favor of migrating the existing customer base from perpetual vSphere to higher-priced subscriptions.

In its most recent earnings report, Broadcom’s infrastructure software revenue, primarily driven by VMware sales, soared 25% year-over-year to $6.6 billion during the quarter. This growth, however, did not stem from a flood of new customers. Instead, Broadcom attributes the revenue growth to the shift of existing customers into its premium subscription bundles.

During the company’s most recent earnings call, CEO Hock Tan said that “This growth reflects our success in converting our enterprise customers from perpetual vSphere to the full VCF software stack subscription. Of our 10,000 largest customers, over 87% have now adopted VCF.”

This conversion strategy involves several key changes that amplify revenue per customer:

• Elimination of perpetual licenses: Customers who once purchased vSphere outright now must subscribe to bundled services that carry higher price points but promise integrated functionality across compute, networking, and storage.
• Aggressive pricing mechanics: In April 2025, Broadcom raised the minimum licensed cores per order from 16 to 72, instantly multiplying costs for smaller deployments and edge workloads.
• SKU simplification: The company collapsed thousands of VMware product options into a handful of bundles, forcing many organizations to pay for capacity or components they may not fully utilize.

The result has been dramatic price increases for customers. Reports suggest renewal costs ranging from 200% to over 1,000% higher, depending on workload profile and contract history. While some large enterprises with complex estates are adapting to the changes, many mid-market and regional operators view the new structure as untenable and are actively exploring alternatives.

The aggressive pricing has also attracted regulatory scrutiny, with European trade groups like CISPE challenging Broadcom’s tactics in court and alleging anticompetitive behavior.

Nutanix’s Momentum

Nutanix emerged early as the competitor best-positioned as the leading alternative to VMware, and the timing couldn’t be better. In its most recent earnings report, the company noted the addition of over 2,700 new customers in fiscal 2025, its largest increase in four years, primarily driven by organizations fleeing VMware’s new pricing model.

The migration momentum is reflected in Nutanix’s financial performance. In its most recent earnings, the company showed annual recurring revenue of $2.22 billion while free cash flow surged 26% to $750 million. Among the new customers were more than 50 Global 2000 companies, representing major enterprises willing to undertake complex, multi-year infrastructure overhauls.

“If you were to characterize this as a multi-inning baseball game, I’d probably say we’re in the second inning,” CEO Rajiv Ramaswami told analysts. With VMware serving approximately 200,000 customers globally, Nutanix sees most of the migration opportunity still ahead.

Nutanix Expansion Beyond HCI

Recognizing that enterprises often resist infrastructure changes due to existing hardware investments, Nutanix has developed strategic partnerships that remove switching barriers. New joint solutions with Dell Technologies and Pure Storage enable customers to migrate away from VMware software while preserving their storage hardware investments.

The approach is already generating results. Nutanix closed its first Dell PowerFlex deals in Q4 with two Global 2000 companies seeking to “modernize their private cloud infrastructure while managing potential risks associated with industry M&A.”

Its joint solution with Pure Storage is expected to become generally available later this year, opening additional revenue opportunities for both companies at Broadcom’s expense.

Pure Storage and Dell Technologies aren’t working exclusively with Nutanix in this market, but rather have offerings that are inclusive of Broadcom’s VMware portfolio. Dell, with its vxRail solutions, is the dominant vendor of external storage for VMware environments.

A Broader Competitive Landscape Emerges

While Nutanix appears to be the biggest beneficiary of the VMware disruption, other competitors are positioning themselves to capture market share:

• Red Hat OpenShift: Rather than offering a direct hypervisor replacement, Red Hat’s Kubernetes-based application platform provides OpenShift Virtualization, allowing organizations to run virtual machines alongside container workloads as a bridge between traditional VM infrastructure and modern cloud-native environments.
• Scale Computing: The company’s HC3 hyperconverged platform targets enterprises seeking simplicity and cost efficiency, positioning itself as a streamlined alternative to traditional virtualization complexity.
• Wind River Systems: Traditionally known for embedded systems, Wind River’s Cloud Platform leverages open-source building blocks to provide a high-performance, cost-effective private cloud alternative.
• Public cloud providers: Microsoft Azure, Amazon Web Services, Oracle Cloud Infrastructure, and Google Cloud all offer competitive virtualization solutions, though with less flexibility than dedicated alternatives.

Competitive Growth, Slow and Steady

While the opportunity for VMware migration revenue is massive, Nutanix executives acknowledge the timeline will be measured in years, not quarters. Smaller organizations can migrate relatively quickly, but large enterprises with complex, mission-critical workloads will require extensive planning and phased implementations.

Nutanix said on its earnings call that it has completed migrations for customers with environments spanning 20,000 to 70,000 cores. Still, the largest enterprise customers will likely take much longer to fully transition. This extended timeline benefits Nutanix by providing a steady pipeline of potential customers over multiple years.

Broadcom’s Response: Innovation and Integration

Broadcom used the VMware Explore stage to declare that the “future is private cloud”. The centerpiece was VMware Cloud Foundation 9.0, positioned as a single-SKU, plug-and-play platform that tightly integrates compute, networking, storage, security, and Kubernetes.

Key announcements included:

• Private AI-as-a-Service: Bundled with VCF 9.0, including a model gallery, model runtime, and agent builder.
• VCF Intelligent Assist: An AI chatbot for operations supporting live actions like GPU workload migration.
• Developer services: Native Kubernetes, vSAN-native S3 object storage, Database-as-a-Service, and GitOps integration.
• Advanced security: VCF Advanced Cyber Compliance, confidential computing, and automated ransomware recovery.

The announcements show a high level of innovation from Broadcom’s VMware team that directly aligns with the pain points experienced by modern enterprises.

The Strategic Calculus

For Broadcom investors, the situation presents a double-edged sword. The subscription licensing transition delivers the predictable, high margin recurring revenue that Wall Street values. However, the customer backlash introduces churn risk that could erode the base once initial contract conversions complete.

Broadcom acknowledges it’s about two-thirds through customer renewals, suggesting another 12 to 18 months of elevated revenue tailwinds. After that, growth will depend more on retention than pricing leverage.

For IT executives, the decision matrix is equally complex. Broadcom positions VMware as the foundation for private cloud repatriation and AI-ready infrastructure, arguments that resonate with enterprises seeking alternatives to hyperscale public clouds.

The critical question for IT organizations is whether VMware’s strategic role in hybrid architectures justifies the budget impact of Broadcom’s new model.

Analyst’s Take

Broadcom’s VMware strategy prioritizes monetizing the existing customer base over expanding it. This approach has generated strong short-term financial results while driving many customers to competitors like Nutanix.

The critical question for 2026 and beyond is whether higher average revenue per customer can continue to outpace the inevitable churn from aggressive pricing shifts. Broadcom has delivered on its promise to investors in the near term, but sustaining momentum without further alienating its customer base will determine whether this high-stakes bet pays off in the long run. This is what we’ll be watching for in the company’s upcoming Q3 FY2025 earnings announcement.

For now, Broadcom’s $6.6 billion in quarterly VMware revenue dwarfs its closest competitors. However, the company’s relentless focus on the bottom line continues driving market disruption, creating substantial opportunities for competitors positioned to capture disaffected customers.

The ultimate success of Broadcom’s strategy will depend on whether it can balance financial optimization with customer retention in an increasingly competitive landscape. That’s a tricky bet to place.

Disclosure: Steve McDowell is an industry analyst, and NAND Research is an industry analyst firm, that engages in, or has engaged in, research, analysis and advisory services with many technology companies, including every company mentioned in this article _except _Microsoft, Google, and Amazon. No company mentioned was involved in the writing of this article.