VMware
Virtualization and private cloud software giant, now Broadcom's Infrastructure Software unit.
On the record
Checkpoint: EU rules on CISPE-led interim measures petition and Tesco v. Broadcom High Court case proceeds
The call
VMware's revenue and lock-in hold for now, but price shock, layoffs, and a 2026-2027 renewal wave are testing how many customers stay rather than migrate.
VMware makes the software that runs virtual machines on corporate servers, and Broadcom now owns it. The company has locked in 90% of its largest customers by making them deeply dependent on related products like NSX networking and vSAN storage, which are hard to untangle. However, competitors like Nutanix, Microsoft Hyper-V, and open-source Proxmox are actively winning defectors, and Broadcom has raised prices so aggressively (sometimes 10 times higher) that customers are leaving anyway. The critical test arrives in 2026 and 2027 when thousands of older customers with cheap contracts can renew or leave, combined with a European antitrust investigation that could force Broadcom to change how it bundles and prices software.
Why
01
AI pressure: None apparent. VMware is arming its platform for AI, not being eaten by it: VCF 9.1 adds GPU passthrough and model-hosting tools for AI workloads. Could AI do the core job? Unlikely.
02
Bigger players: Nutanix, Red Hat OpenShift Virtualization, Microsoft Hyper-V/Azure Local, Proxmox VE. Steep subscription price hikes after ESXi went paid-only are pushing customers to test these live alternatives during renewal. Could a giant copy it? No, they are blocked.
03
What protects it. NSX and vSAN integrations lock workloads deep into VCF, and over 90% of the top 10,000 accounts already signed subscription deals.
What would change this call
Outcome of Tesco's £100M+ UK High Court suit against Broadcom over perpetual license breach. Would show whether courts penalize VMware's licensing shift, encouraging more customer defections.
EU General Court ruling on CISPE's annulment challenge to the VMware merger clearance. Would show whether regulators force changes to Broadcom's VMware pricing and bundling practices.
Broadcom's infrastructure software revenue growth rate in Q3 FY2026 versus prior 9-31% range. Would show whether the 2026-2027 renewal wave is causing customer losses or holding steady.
EU General Court ruling on CISPE's annulment challenge to the VMware merger clearance. Would show whether regulators force changes to Broadcom's VMware pricing and bundling practices.
Broadcom's infrastructure software revenue growth rate in Q3 FY2026 versus prior 9-31% range. Would show whether the 2026-2027 renewal wave is causing customer losses or holding steady.
Key numbers
- Infrastructure Software revenue $7.18B, +9% YoY
- Over 90% of top 10,000 customers on VCF subscriptions
- VMware headcount down 51% since acquisition, 25.4k to 12.4k
Named risks
- 2026-2027 renewal wave could see large legacy customers migrate away rather than accept subscription terms.
- EU antitrust interim measures or CISPE annulment could force changes to Broadcom's VMware licensing model.
- Litigation precedent from Tesco £100M+ suit could embolden other large customers to sue or exit.
- Continued VMware-specific layoffs and integration churn creating employee attrition and morale risk.
- Broadcom's high valuation (P/E 62-66x) could compress sharply if AI-semiconductor narrative falters, pressuring VMware unit scrutiny.
Rivals, as read in July 2026
| Rival | Direction | Evidence |
|---|---|---|
| Nutanix | gaining on | Cited 2026-07-06 as top destination for VMware migration decisions among enterprises |
| Proxmox VE | gaining on | Open-source alternative gaining adoption among cost-sensitive and homelab users after free ESXi was discontinued, 2026-04-15 |
| Red Hat OpenShift Virtualization | gaining on | Cited 2025-08-18 as gaining share among large regulated enterprise estates |
| Microsoft Hyper-V/Azure Local | gaining on | Benefiting from Windows-heavy shops migrating off VMware, cited 2026-04-06 |
| Tesco (as customer defector) | losing to | Tesco migrating about 40,000 workloads off VMware amid £100M+ lawsuit, filed 2025-07-15 |
Questions people ask
- Is VMware still profitable under Broadcom in 2026?
- Yes. Broadcom's Infrastructure Software segment, dominated by VMware, posted $7.18B revenue in Q2 FY2026 (up 9% YoY, as of 2026-06-08), and guidance points to about $8.9B for Q3 FY2026, up 31% YoY, showing continued growth despite customer churn at the edges.
- Has Broadcom laid off a lot of VMware staff?
- Yes. VMware-specific headcount fell from about 25,415 in 2023 to 12,449 in 2025, roughly a 51% cumulative decline since the Broadcom acquisition closed, per Revelio Labs data dated 2025-12-01. Layoffs began immediately after the November 2023 close.
- Is joining VMware (Broadcom) a safe career move in 2026?
- Risk is elevated. VMware headcount dropped about 51% since the 2023 Broadcom acquisition, and 2026 employee sentiment reporting (2026-04-13) flags ongoing change fatigue and job insecurity, though the parent company remains highly profitable overall.
- Who is VMware's biggest competitor for enterprise virtualization?
- Nutanix is cited as of 2026-07-06 as the most direct enterprise-grade alternative and the plurality winner of VMware migration decisions, followed by Microsoft Hyper-V, Red Hat OpenShift Virtualization, and open-source Proxmox VE for cost-sensitive shops.
- Could AI replace VMware's core virtualization products?
- Unlikely directly. VMware's compute, storage, and networking virtualization is infrastructure plumbing orthogonal to generative AI automation. Instead, VMware shipped VCF 9.1 in May 2026 with Private AI Services, positioning itself as infrastructure that AI workloads need rather than something AI replaces.
- Why are VMware customers suing Broadcom?
- Customers like Tesco allege breach of perpetual license terms after Broadcom forced a subscription model. Tesco filed a UK High Court suit on 2025-07-15 seeking over £100 million and is reportedly migrating about 40,000 server workloads off VMware as a result.
Timeline
- 2026-07-15Five EU cloud trade groups urge Commission to impose interim measures on Broadcom's VMware practices
- 2026-06-18Tesco vs Broadcom lawsuit details reported, seeking over £100 million, migrating 40,000 workloads
- 2026-06-08Broadcom Q2 FY2026 results show Infrastructure Software revenue of $7.18B, up 9% YoY
- 2026-05-05VMware Cloud Foundation 9.1 goes GA with VCF Private AI Services and GPU passthrough support
- 2026-03-04Broadcom Q1 FY2026 earnings call cites 13% VMware revenue growth and 19% ARR growth
- 2026-01-25Fidelity settles breach-of-contract suit with Broadcom over VMware licensing
- 2025-07-24CISPE files annulment action against EU's 2023 clearance of Broadcom-VMware merger
- 2025-07-15Tesco files UK High Court lawsuit against Broadcom over VMware licensing
- 2024-02-05Broadcom Advantage Partner Program replaces legacy VMware partner program
- 2023-11-22Broadcom closes $69 billion acquisition of VMware
Revision history
24 July 2026
First assessed. Defensible for now. The text above is fixed as of this date and is not edited afterwards.
In the same band
Sources
- Broadcom Q2 FY 2026: VMware Stability Supports AI-Led Semiconductor Expansion (2026-06-08)
- Broadcom (AVGO) Q1 2026 Earnings Call Transcript (2026-03-04)
- Broadcom (AVGO) Q2 2026 Earnings Transcript (2026-06-08)
- Broadcom not infallible in fight with ex-VMwarers as another court battle ends in a settlement (2026-01-25)
- How many employees work at VMware? (2025-12-01)
- Broadcom Number of Employees 2026 (2026-06-29)
- VMware New Licensing Model: 2026 Subscription Math (2026-04-09)
- Per-Core Subscription Cost
- Broadcom Announces VMware Cloud Foundation 9.1 (2026-05-05)
- Streamline, Simplify and Protect all your AI workloads with VCF 9.1 (2026-05-05)
- Best VMware Alternatives in 2026 (2026-04-15)
- Broadcom's VMware alterations include layoffs, changes to partner programs (2024-01-05)