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Broadcom’s takeover of VMware continues to deliver strong revenue and margin growth, and the company expects demand for AI hardware will do likewise in coming years.
The chips ’n’ code company on Thursday announced its Q2 2025 results, which saw revenue grow 20 percent year over year to reach $15 billion. Net income surged 124 percent year over year to $4.95 billion.
The company’s infrastructure software business unit, which comprises VMware, Computer Associates and Symantec’s enterprise business, earned $6.6 billion of revenue, up 25 percent year over year.
Before acquiring VMware, Broadcom’s quarterly infrastructure software revenue was not quite $2 billion. At the time VMware revenue was around $3.4 billion a quarter. CA and Symantec didn’t grow revenue substantially in recent years so it appears Broadcom has boosted VMware quarterly revenue by around $1 billion.
Operating margins for the infrastructure software group hit 76 percent, up from 60 percent a year ago. Broadcom CFO Kirsten Spears said that result “reflects our disciplined integration of VMware.”
On Broadcom’s earnings call, CEO Hock Tan told investors 87 percent of VMware’s top 10,000 customers have signed up for its flagship Cloud Foundation (VCF) private cloud bundle. Broadcom has made sales of VCF a priority and no longer sells standalone VMware products. That policy means most VMware users see increased bills, a situation Broadcom justifies by arguing that a full VCF implementation quickly pays for itself.
That strategy appears to be working, but Broadcom has more work to do because Tan said Broadcom is “more than halfway” through a license renewal cycle that he thinks will last another 18 months.
XPU acceleration
Broadcom’s chips biz also reported strong growth, with revenue of $8.4 billion climbing 17 percent year-over-year.
Sales of AI-related hardware grew 46 percent to $4.4 billion for the quarter.
Broadcom has engaged with three customers it says will acquire millions of custom accelerators (XPUs), and says it is talking to another four that are considering similar purchases.
“These partners are still unwavering in their plan to invest despite the uncertain economic environment,” Tan told investors. “In fact, what we’ve seen recently is that they are doubling down on inference in order to monetize their platforms.” The shift to inferencing workloads saw the CEO predict a possible “acceleration of XPU demand into the back half of 2026 to meet urgent demand for inference on top of the demand we have indicated from training.”
Tan forecasted growth in Broadcom’s AI silicon business will accelerate to 60 percent, driven by demand for XPUs and AI networking kit.
He also predicted that as AI infrastructure players build bigger GPU clusters, optical interconnects will replace copper.
“That’s going to happen within a year or two,” Tan predicted, and pledged Broadcom will “be right in the forefront of it.”
Just what “it” is remains to be seen.
“It may be co-packaged optics, which we [have] very much in development,” Tan said, before suggesting a co-packaged pluggable optical interconnect could be the first step in a transitional phase.
Revenue from Broadcom’s non-AI silicon business dropped five percent. The company reported “bright spots” in the form of sequential growth for products used in broadband, enterprise networking, and storage. However, industrial sales slowed, and wireless silicon sales took an expected seasonal slide. Tan forecast steady sales for non-AI silicon, suggesting the business is mature.
Broadcom is famously acquisitive, so a financial analyst asked about its merger and acquisition strategy. Tan replied that Broadcom intends to use free cashflow to pay down debt or buy back stock, and that the company would fund any future acquisitions with fresh borrowings.
Investors weren’t thrilled and sent Broadcom’s share price down by around four percent in after hours trading. ®
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