VMware Migration Strategy: Broadcom Won by Losing the Right Customers

Everyone assumes Broadcom’s VMware acquisition backfired. Thousands of customers migrating, rivals celebrating poached deals, customer sentiment decidedly negative—by traditional metrics, it looks like a disaster. But Broadcom’s Q1 2026 earnings tell a different story: the company expects software revenue to jump 9% to $7.2 billion in Q2, largely because of VMware.

Broadcom is up 9% on VMware software revenue while its customers publicly rage-quit. Hold that contradiction in your head before you build a migration strategy around the wrong premise.

The VMware Migration Wave Is Real (But Intentional)

Since Broadcom completed its acquisition of VMware in November 2023, the departures have been loud and documented. Nutanix CEO Rajiv Ramaswami, speaking at the company’s .NEXT conference in Chicago, said that Nutanix has “about 30,000 customers”—with thousands coming from VMware. A Nutanix spokesperson confirmed to Ars Technica that “thousands” of customers have migrated, without specifying exact numbers. A January CloudBolt Software survey of 302 IT decision-makers at North American firms found that 95 percent had migrated at least 1 percent of workloads off VMware. Gartner projected that 35 percent of VMware workloads would migrate elsewhere by 2028.

Those are not small numbers. But they’re also not random. The customers leaving share a profile: they’re SMBs and mid-market organizations who found VMware unaffordable after Broadcom eliminated perpetual licenses, forced product bundling around VMware Cloud Foundation (VCF), and culled channel partners. According to Ars Technica’s reporting, Broadcom’s strategy “has made VMware unaffordable or impractical for most small- to medium-size businesses.”

That’s not a bug. It’s the feature.

Why Broadcom Wanted to Lose SMB Customers

Broadcom’s playbook is not new. The company has run the same script with CA Technologies and Symantec: acquire a dominant platform, strip out the low-margin customer base, raise prices on the sticky enterprise segment, and watch margins expand. VMware is the largest version of that bet yet.

The economic logic is clean. Thousands of SMB customers generate support tickets, demand reseller relationships, and consume engineering resources—while paying relatively little per seat. A single enterprise customer running hundreds of thousands of cores under a VCF bundle is a different calculus entirely. Broadcom CEO Hock Tan pointed to AI demand and the RAM shortage as factors driving enterprise customers deeper into VMware products, per The Register’s coverage of the Q1 2026 earnings call.

Enforcing licensing is also simpler at the enterprise tier. Large organizations have procurement teams, legal exposure, and audit risk. They negotiate, but they pay. SMBs hunt for workarounds or just leave—which is exactly what Broadcom anticipated.

The VCF bundle is the mechanism. It packages vSphere, vSAN, NSX, and vCenter into a single subscription. For a 500-VM shop, it’s overbuilt and overpriced. For a 50,000-core enterprise, it’s a defensible consolidation of infrastructure spend—and a licensing structure Broadcom can audit and enforce.

The Enterprise Lock-In That’s Actually Working

Here’s the number that cuts through the noise: Broadcom CEO Hock Tan said in September that more than 90 percent of VMware’s biggest vSphere customers had bought VCF. That statistic, reported by CRN, describes near-total retention among the customers Broadcom actually wanted to keep.

Those enterprise customers aren’t staying out of affection. They’re staying because the switching cost is genuinely brutal at scale. Migrating 100,000 cores of workloads requires re-architecting networking, storage, and automation pipelines—often simultaneously. Nutanix’s Ramaswami noted that his company has “migrated multiple 100,000-core workloads in less than a year,” which he presented as a selling point. It’s also an implicit admission that the effort required to get there is substantial enough to be a differentiator.

Western Union’s migration illustrates the friction. According to Brandon Shaw, Nutanix VP and head of technology services, speaking at .NEXT, Western Union has spent six months migrating 900 to 1,200 applications across 3,900 cores. That’s a mid-sized deployment by enterprise standards. A Fortune 100 company with ten times that footprint isn’t moving in a year without a dedicated program team and executive mandate.

Broadcom doesn’t need those customers to love the product. It needs the switching cost to exceed the pain of renewal.

Where Nutanix and Open Competitors Win (And Where They Stall)

Nutanix is the clearest beneficiary of the VMware disruption, and the .NEXT conference made clear the company is leaning hard into that positioning. Ramaswami said new VMware migrations represented Nutanix’s “strongest quarterly new logo additions in eight years.” New customers include Everland, South Korea’s largest theme park, and the Wynn Hotel in Boston, which Ramaswami said has fully migrated off VMware. Microsoft’s Hyper-V and Azure stack captured 43 percent of migrating workloads in the CloudBolt survey. Proxmox has gained traction in smaller deployments.

But notice what those wins have in common: they’re mid-market. Nutanix itself acknowledged to Ars Technica that adoption is “strongest among mid-market customers” and that it’s trying to woo larger customers “often by starting with partial deployments.” That qualifier—partial deployments—tells you everything about where the ceiling is.

Displacing VMware at a bank running 200,000 cores across multiple data centers requires more than a better price sheet. It requires feature parity on mature enterprise capabilities, proven support at that scale, and a migration path that doesn’t require a two-year freeze on new projects. Nutanix can win the pitch meeting at a 200,000-core bank. It cannot yet win the proof-of-concept.

Broadcom doesn’t need Nutanix to fail. It just needs its best enterprise accounts to conclude the risk isn’t worth it—for one more renewal cycle.

What This Means for Your VMware Migration Strategy

Cut past the sentiment: Broadcom has already sorted your organization into one of two buckets — kept or deprecated — and your renewal price is the tell. The answer determines whether your VMware migration strategy should be proactive or reactive—and how much urgency to assign to it.

If you’re running vSphere at significant scale, have already transitioned to VCF, and have a direct enterprise agreement with Broadcom, you’re in the kept segment. Broadcom will invest in keeping you. That 90 percent VCF conversion rate suggests the company is delivering enough roadmap credibility to hold enterprise renewals. Your migration calculus should be based on total cost of ownership and strategic fit, not panic.

If you’re mid-market—say, under 5,000 cores, historically reliant on perpetual licensing, and dependent on channel partners who were culled from Broadcom’s program—you are in the deprecated segment. Competitive alternatives are maturing fast. Nutanix’s hyperconverged infrastructure platform has real enterprise migration wins behind it now. Microsoft’s stack is a credible landing zone for organizations already deep in Azure. Proxmox is viable for teams with strong Linux operations capability. The window to migrate on your own timeline, rather than under renewal pressure, is open now and won’t stay that way indefinitely.

One concrete step worth taking immediately: map your current VMware footprint against VCF bundle requirements. If you’re paying for capabilities you don’t use—and most mid-market shops are—that gap is your negotiating position and your business case for migration simultaneously. Don’t wait for the renewal letter to start that analysis.

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Ramaswami called customer sentiment “negative about Broadcom.” That’s accurate. It’s also irrelevant to Broadcom’s strategy—which was never about being liked.

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