Dive Brief:
- Broadcom nearly completed its integration of VMware and almost tripled infrastructure software revenues during fiscal year 2024 to $21.5 billion as a result, Broadcom CEO Hock Tan said Thursday, speaking during a Q4 2024 earnings call. Segment revenues were just $7.6 billion the prior year.
- The chipmaker also saw its semiconductor business spike to $30.1 billion on the year, driven largely by AI. “Our AI revenue, which came from strength in custom AI accelerators or XPUs and networking, grew 220%,” Tan said.
- Broadcom’s acquisition of VMware expanded the company’s software segment to nearly the level of its chipmaking business. Infrastructure software revenues increased by 196% year over year in Q4 to $5.8 billion, largely due to VMware, Tan said. The segment now represents 41% of Broadcom’s total business.
Dive Insight:
VMware has been a boon to Broadcom’s bottom line. But the $61 billion acquisition rattled even top-tier enterprise customers, as Broadcom bundled together hundreds of VMware solutions and ended perpetual licensing in favor of a subscription-based model.
Longtime users of the ubiquitous virtualization solution suite saw their purchasing options shrink and costs skyrocket by as much as 500% or more, according to Forrester. The analyst firm expects VMware’s top 2,000 customers to shrink their deployments by 40% next year, in favor of public cloud and on-prem alternatives.
Tan said VMware business picked up during the three months ending Nov. 3, with CPU core bookings increasing to $21 million from $19 million during the previous quarter. CPU cores are the subscription-model billing units used by Broadcom.
VMware generated 70% of its subscription business through the VMware Cloud Foundation private cloud bundle, Tan said. The company signed 4,500 of its largest 10,000 customers to the VCF full-stack solution.
As Tan turns the page on VMware integration, AI hardware has become the focus for growth over the next several years.
“We see our opportunity over the next three years in AI as massive,” Tan said, pointing to three specific hyperscale customers. Broadcom supplies the largest cloud providers with the silicon building blocks, XPU accelerator technology and networking equipment for customized AI processors.
“We currently have three hyperscale customers who have developed their own multi-generational AI XPU roadmap to be deployed at varying rates over the next three years,” Tan said. “We expect this to represent an AI revenue serviceable addressable market, or SAM, for XPUs and network in the range of $60 billion to $90 billion in fiscal [year] 2027 alone.”
