VMware revenue drops by 600 million, but Broadcom is hopeful

VMware revenue drops by 600 million, but Broadcom is hopeful

VMware’s quarterly revenue fell $600 million in Q2. The results are a far cry from Q1 2024, which set a record 3.28 billion in revenue. In its first full quarter housed under Broadcom, however, there are more positive signs for the VMware division.

CEO Hock Tan said in a conference call that VMware’s integration within the Broadcom portfolio is progressing well. “We have modernized the product SKUs from over 8,000 disparate SKUs to four core product offerings” Tan concludes that the transition to a subscription model is going well.

Customers book en masse, costs heavily reduced

Forward bookings are proving to be a lucrative income stream for Broadcom. 3,000 of the largest 10,000 VMware customers have already signed up for multiple years. After effectively restarting the VMware partner network this year, Broadcom already has generated $1.9 billion in bookings, up from $1.2 billion in the previous quarter.

Incidentally, the lower quarterly revenue is being firmly offset by cost savings. Following rounds of layoffs and the reduction of VMware offerings, costs have dropped from $2.3 billion per quarter to $1.6 billion. Broadcom expects it to reach 1.4 billion by the end of 2024, but sees opportunities for further savings toward 1.2 billion.

VMware pulled in line

We have previously described Broadcom’s strict housekeeping at VMware in detail. A core goal for the company is to have the business operate like all other Broadcom divisions. That means cost savings wherever possible and focusing intently on the most profitable, high-end customers. Operating margin, i.e. profit earned per dollar of revenue, is expected to align with the rest of Broadcom at VMware soon. Below the line, the division will be judged internally on that.

Broadcom’s entire software business consists of the acquired parties VMware, CA Technologies, and Symantec. Collectively, they brought in $5.3 billion this quarter.

Also read: VMware customers want to migrate away – not all of them can