{"id":9783,"date":"2024-12-14T11:40:48","date_gmt":"2024-12-14T18:40:48","guid":{"rendered":"https:\/\/jasonsblog.ddns.net\/?p=9783"},"modified":"2024-12-15T09:49:12","modified_gmt":"2024-12-15T16:49:12","slug":"broadcom-says-vmware-is-a-better-money-making-machine-than-it-hoped","status":"publish","type":"post","link":"https:\/\/jasonsblog.ddns.net\/index.php\/2024\/12\/14\/broadcom-says-vmware-is-a-better-money-making-machine-than-it-hoped\/","title":{"rendered":"Broadcom Says VMware Is a Better Money-Making Machine Than It Hoped"},"content":{"rendered":"\n

This is bad form from Broadcom, admitting that their margin is 70% on VMware products after trying to juice a bunch of clients with fee changes and increases, to the point that AT&T sued them<\/a> and many customers were jumping ship and looking into alternatives<\/a>. They did do some deal and price adjustments to try and limit the damage, but such a high margin I’m sure will not be lost on customers. On the positive, they did away with VMware Player and made VMware Workstation free for all to use<\/a>, and I do enjoy VMware Workstation as they have good 3D graphics acceleration support, as I’m using Debian Testing in it as this moment (full screen just like it’s natively installed). Eventually though I’ll do away with this Windows 10 workstation and go full Linux and use Linux’s built in virtualization to run other Linux distributions, as virtual machines give you some insulation from malware and can be wiped and replaced easily.<\/p>\n\n\n\n

https:\/\/www.theregister.com\/2024\/12\/13\/broadcom_q4_fy_2024_vmware\/<\/a><\/p>\n\n\n

<\/div><\/div><\/div>\n\n\n
Chip side of the biz expects to take lion’s share of hyperscalers’ $60-90 billion XPU spend in 2027, helped by 3nm models coming next year<\/h5>\n\n\n\n

Broadcom has told investors its integration of VMware is all but done, ahead of schedule, and that it has turned the virtualization giant into an even more prolific money machine than it hoped would be possible.<\/p>\n\n\n\n

Speaking on the giant conglomerate’s Q4 2024 earnings call today, Broadcom CEO Hock Tan told investors VMware’s quarterly costs have fallen from an average $2.4 billion to $1.2 billion in this quarter, and margins have gone from below 30 percent to 70 percent. He didn’t break out Virtzilla’s revenue, and said Broadcom won’t do so again.<\/p>\n\n\n\n

But he did use two other metrics to describe VMware’s progress: Processor cores covered by new subscription sales, and annual booking value (ABV).<\/p>\n\n\n\n

The latter, which measures the value of future revenue from subscriptions, saw $2.7 billion worth of deals done in the quarter \u2013 up $200 million from Q3. Tan revealed VMware sold subs for 21 million processor cores in the quarter \u2013 up from 19 million in Q3.<\/p>\n\n\n\n

The CEO also told investors that 17 million of those newly-sold cores will be used to run the flagship private cloud suite VMware Cloud Foundation (VCF), and that 4,500 of Broadcom’s top 10,000 VMware customers have signed up for VCF since the acquisition.<\/p>\n\n\n\n

Full-year revenue for Broadcom\u2019s software division hit $21.5 billion, up from $7.6 billion for FY 2023 \u2013 an increase of $13.8 billion. VMware\u2019s last full year of revenue as an independent company was $13.4 billion, and Broadcom did not own the virty giant for a few weeks of its FY 2024 and therefore can’t count a few hundred million dollars of revenue. The Register<\/em> also feels safe in assuming that the other parts of Broadcom\u2019s software biz \u2013 CA and Symantec \u2013 are not growing fast, if at all.<\/p>\n\n\n\n

It therefore looks a lot like VMware revenue is growing and Broadcom\u2019s strategy is working.<\/p>\n\n\n\n

Tan’s remarks about margin improvement suggest as much. He followed them with a prediction that Broadcom’s planned $8.5 billion EBITDA<\/a> growth for VMware would be achieved in a tighter time frame than the three years initially forecast \u2013 and that further improvements are achievable.<\/p>\n\n\n\n

With that kind of prediction on record during an earnings call \u2013 wherein execs are encouraged to be conservative in forward statements \u2013 VMware customers surely have a clear signal Broadcom won’t need to change its plans, which bring increased costs to most customers.<\/p>\n\n\n\n

Chipping away at hyperscalers<\/h3>\n\n\n\n

Tan offered investors two other forecasts for Broadcom’s silicon business, which he noted now needs to be discussed in AI-adjacent and non-AI segments.<\/p>\n\n\n\n

The CEO told investors Broadcom see huge growth ahead from hyperscale customers of its XPU accelerators and associated networking gear. Three existing hyperscale customers intend to use Broadcom kit to build million-XPU clusters \u2013 an addressable opportunity worth between $60 and $90 billion in 2027. Tan asserted that Broadcom is “very well positioned to achieve leading market share in this opportunity.”<\/p>\n\n\n\n

He also revealed Broadcom is talking to another pair of hyperscalers about custom accelerators that will use its IP \u2013 meaning more big opportunities lie ahead. The CEO celebrated hyperscalers’ interest in Broadcom’s wares as a sign that Ethernet is in favor \u2013 an important observation given Nvidia’s fondness for InfiniBand.<\/p>\n\n\n\n

Tan also pledged that Broadcom’s next-generation XPUs, built on a 3nm process, will debut in the second half of 2025. Tan claimed they’ll be the first products in the field built at 3nm.<\/p>\n\n\n\n

AI silicon is powering growth for Broadcom’s chip division, which earned $8.2 billion \u2013 up 12 percent year on year. AI-related sales grew 150 percent year on year to $3.7 billion, while other products were down 23 percent to $4.5 billion. Tan noted that non-AI chips have come out of a slump and will recover.<\/p>\n\n\n\n

Which brings us to those two forecasts: Tan predicted non-AI silicon sales will slip by “mid-teens” in Q1 of 2025, while AI chips grow by 65 percent.<\/p>\n\n\n\n

Broadcom remains in rude health. Quarterly revenue of $14 billion represented a 51 percent year-on-year leap, and annual revenue of $51.5 billion was up an impressive 44 percent. Net income for the full year<\/a> was $5.9 billion \u2013 a drop of $8.2 billion \u2013 but free cashflow is strong, and Tan declared Broadcom will use it to pay down the debt it used to acquire VMware.<\/p>\n\n\n\n

He also revealed that Broadcom is quietly looking for other software acquisitions, but has strict demands for target prey. He did not suggest any purchases are imminent.<\/p>\n\n\n\n

Investors liked what they heard: Broadcom’s share price jumped 15 percent in after hours trading.<\/p>\n","protected":false},"excerpt":{"rendered":"

This is bad form from Broadcom, admitting that their margin is 70% on VMware products after trying to juice a bunch of clients with fee changes and increases, to the point that AT&T sued them and many customers were jumping ship and looking into alternatives. They did do some deal and price adjustments to try […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"class_list":["post-9783","post","type-post","status-publish","format-standard","hentry","category-tech"],"blocksy_meta":[],"featured_image_src":null,"author_info":{"display_name":"Jason","author_link":"https:\/\/jasonsblog.ddns.net\/index.php\/author\/jturning\/"},"_links":{"self":[{"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/posts\/9783","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/comments?post=9783"}],"version-history":[{"count":3,"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/posts\/9783\/revisions"}],"predecessor-version":[{"id":9790,"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/posts\/9783\/revisions\/9790"}],"wp:attachment":[{"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/media?parent=9783"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/categories?post=9783"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/tags?post=9783"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}