Broadcom Boosts VMware AI Push to Challenge Nutanix & Microsoft

Broadcom AVGO is expanding VMware’s role in enterprise private artificial intelligence (AI) infrastructure as organizations increasingly look to deploy AI workloads across secure on-premises and private-cloud environments. VMware Cloud Foundation (VCF) 9.1 strengthens this effort by improving infrastructure efficiency, security and support for enterprise AI inferencing. The expansion could help Broadcom capture a larger share of enterprise AI and hybrid-cloud spending while strengthening its position against Nutanix NTNX and Microsoft MSFT. Broadcom’s infrastructure software already helps enterprises modernize, optimize and secure complex private-cloud, hybrid-cloud and edge environments.

VCF 9.1 broadens VMware’s relevance as enterprises combine AI workloads with traditional applications. The platform supports heterogeneous computing across AMD, Intel and NVIDIA architectures, allowing customers to run AI, Kubernetes and conventional virtualized workloads within a common private-cloud environment. Broadcom noted that VCF 9.1 deployments for on-premises cloud computing have been extremely strong and are contributing to robust revenue growth.

The momentum is already visible in Broadcom’s infrastructure software business. Software revenues increased 9% year over year to $7.2 billion in the second quarter of fiscal 2026, while annualized recurring revenues advanced 17%. Broadcom expects infrastructure software revenues to reach approximately $8.9 billion in the third quarter, representing 31% year-over-year growth. Strong VCF demand contributed to higher operating income in Broadcom’s infrastructure software business.

VMware gives Broadcom exposure to a highly profitable software stream. Infrastructure software generated a 93% gross margin in the second quarter of fiscal 2026, while operating margin improved to roughly 79%. Growing deployments of CPUs alongside Graphics Processing Unit (GPUs) are accelerating VMware growth and Broadcom expects this momentum to continue over the next several quarters. This combination of AI-enabled private-cloud adoption, recurring revenues and strong margins could make VMware an increasingly important contributor to AVGO.

AVGO Faces Tough Competition

Nutanix is intensifying its competition with Broadcom by positioning the Nutanix Cloud Platform and Nutanix Agentic AI as flexible alternatives for enterprise hybrid-cloud and AI deployments. Nutanix Agentic AI is designed to lower complexity, strengthen security and provide more predictable costs, while supporting both AMD and NVIDIA GPUs. Nutanix Agent Gateway adds governance and cost controls for AI spending. Its external-storage strategy lets customers migrate while retaining existing Dell, NetApp and other storage infrastructure, reducing switching costs. Nutanix secured several seven-figure ACV deals in the fourth quarter, with customers citing lower total cost of ownership and easier migration. Management also expects external storage to become a meaningful growth contributor. 

Microsoft presents a broader challenge through Azure and its enterprise AI ecosystem. In the fourth quarter of fiscal 2026, Azure surpassed $100 billion in annual revenues, growing 41%, while Microsoft continues expanding AI infrastructure capacity. Microsoft’s Sovereign Cloud enables customers to run models across public, customer-controlled and fully disconnected environments, while Foundry offers more than 11,000 AI models and has seen a fivefold increase in customers building with models from multiple providers. Broadcom itself acknowledges that workload migration to public clouds could limit demand for its virtualization portfolio.

AVGO’s Share Price Performance, Valuation & Estimates

Shares of Broadcom have gained 6.3% year to date, underperforming the broader Zacks Computer and Technology sector’s 16.8% growth.

AVGO Stock’s Price Performance

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AVGO stock is trading at a premium, with forward 12-month price/earnings of 20.70X compared with the broader sector’s 20.65X. Broadcom has a Value Score of D.

AVGO’s Valuation

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The Zacks Consensus Estimate for Broadcom’s earnings is currently pegged at $3.22 per share, unchanged over the past 30 days, suggesting 90.53% growth.

Broadcom Inc. Price and Consensus

Broadcom Inc. price-consensus-chart | Broadcom Inc. Quote

Broadcom currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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