VMware Push Takes Aim at MSFT, GOOGL, AMZN

When it comes to semiconductor giant Broadcom NASDAQ: AVGO, investors and markets are overwhelmingly focused on its custom artificial intelligence (AI) chips, which makes sense. AI has been the definitively dominant topic in the market for many years now and is the main driver behind Broadcom’s soaring share price.

Broadcom Today

$338.37 +0.19 (+0.06%)

As of 10/3/2025 04:00 PM Eastern

52-Week Range

$138.10

▼

$374.23

Dividend Yield

0.70%

P/E Ratio

86.32

Price Target

$357.22

However, Broadcom is much more than a one-trick pony, having multiple avenues through which it can add value to shareholders. One is Broadcom’s thriving infrastructure software segment. It saw revenues grow by 25% in fiscal Q2 and 17% in fiscal Q3.

Through its software segment anchor, VMware, Broadcom has ambitions to take on some of the biggest tech companies in the world. Below, we will break down how Broadcom is positioning VMware as a legitimate alternative to cloud service providers (CSPs) like Microsoft NASDAQ: MSFT, Alphabet NASDAQ: GOOGL, and Amazon.com NASDAQ: AMZN. This is a rare opportunity that many are not discussing, which could provide long-term benefits to AVGO shares.

How Broadcom Can Benefit From a Private Cloud Shift

Over the last 12 months, the three tech giants above generated a combined $270 billion in revenue from their CSP segments. Enterprise customers use their clouds to run essential business workloads, with public cloud services generating the vast majority of this revenue. Public cloud refers to thousands of different companies running workloads on data center infrastructure that these three firms own. The alternative to public clouds is a private cloud, where a business owns and manages the data center infrastructure itself. A hybrid cloud strategy refers to using a mixture of both private and public clouds.

Through VMware, Broadcom is working to make using private clouds more attractive. In doing so, Broadcom could potentially take a larger piece of the massive cloud computing market. Notably, Broadcom’s total revenue for the last 12 months was only around $60 billion, a mere fraction of the cloud computing market. Thus, if Broadcom can take just a portion of this huge pie, it could have significant implications for the company’s growth, leading to gains for shareholders. Now, let’s dive into how Broadcom actually hopes to do this.

VCF 9.0: Broadcom’s Key to Private Cloud Adoption

Broadcom’s VMware software helps enterprises manage their cloud computing resources, particularly in private and hybrid cloud environments. It also integrates with the CSPs to manage resources in public environments. Now, Broadcom is trying to shift the playing field through its latest VMware update, VCF 9.0.

The update creates a more unified and streamlined way to manage private cloud infrastructure. It seeks to make doing so as easy as it would be if an enterprise were using a public cloud. In Broadcom’s fiscal Q3 earnings call, Chief Executive Officer Hock Tan said VCF 9.0 “provides the real alternative to public cloud.” This comes as Tan argues that private cloud now outperforms public cloud. It offers better security, cost management, and control.

Rising and unpredictable costs of using public clouds are an important concern for businesses. CloudZero conducted a study among 1,000 professionals who work for companies that utilize Microsoft, Alphabet, or Amazon as their primary cloud provider. The majority of those surveyed said their cloud costs were too high. Almost 90% of respondents also said that a lack of cloud cost visibility prevents them from doing their jobs well. Part of the reason for this is the “hidden costs” that CSPs charge customers.

Moving workloads back to the public cloud is one way to get control over these costs, as companies manage data center resources more directly. However, this can also require investing in expensive computing infrastructure, hindering private cloud adoption. Still, things seem to be moving in the right direction.

According to a 2024 Barclays study, 83% of enterprise Chief Information Officers plan to move at least some of their workloads from the public cloud to the private cloud, up from 43% in 2020. Also, 65% of enterprises building AI models prefer to do so on private or hybrid clouds. Clearly, there is evidence that companies are noticing the benefits of private clouds, providing VMware with a growth opportunity.

With AI-Chips Taking All the Shine, VMware Adds Upside

Overall, if a major shift toward private clouds happens, Broadcom could gain significant advantages. This is especially true considering the enormous size of public cloud revenues.

With so much focus on Broadcom’s AI chip business, VMware has the potential to contribute underappreciated upside to shares. For investors, this is just another reason to be bullish on AVGO stock in the long term.

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