Broadcom used VMware to rebalance chips with infrastructure software

Broadcom had already used acquisitions to build a software arm, but semiconductors still dominated the company. Buying VMware in November 2023 gave it a much larger infrastructure software base tied to enterprise cloud operations.

The company did not keep every inherited asset. It focused VMware around cloud infrastructure software and sold the end-user computing business to KKR for $3.5 billion in July 2024.

The first-year mix shift was large. Fiscal 2024 revenue rose 44% to $51.6 billion, infrastructure software revenue rose 181%, and VMware contributed $12.4 billion of revenue.

Acquisition and restructuring costs weighed on GAAP operating income during the transition.

VMware gave Broadcom a major enterprise software platform rather than another point product.

Selling the end-user computing unit made the acquired portfolio more focused.

Enterprise license models helped Broadcom turn complex infrastructure software into larger account relationships.

A platform acquisition can change a company's revenue mix quickly when management also narrows the acquired portfolio to the workloads it wants to own.

The VMware year also brought integration costs, so GAAP operating income did not rise in step with revenue. Still, Broadcom had changed its business mix from mostly chips into a larger chips-plus-infrastructure-software company.