Broadcom Expands VMware AI Push to Challenge Nutanix and Microsoft

Broadcom (AVGO) is expanding VMware's role in enterprise private artificial intelligence (AI) infrastructure as organizations increasingly 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 platform supports heterogeneous computing across AMD, Intel and NVIDIA architectures, letting customers run AI, Kubernetes and conventional virtualized workloads within a common private-cloud environment. Broadcom said VCF 9.1 deployments for on-premises cloud computing have been extremely strong and are contributing to revenue growth.

The momentum is visible in Broadcom's infrastructure software business. Software revenues rose 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 roughly $8.9 billion in the third quarter, representing 31% year-over-year growth. Infrastructure software generated a 93% gross margin in the second quarter, with operating margin improving to about 79%.

Competition is intensifying. Nutanix (NTNX) is positioning its Cloud Platform and Nutanix Agentic AI as flexible alternatives, securing several seven-figure ACV deals in the fourth quarter, with customers citing lower total cost of ownership and easier migration. Microsoft (MSFT) presents a broader challenge through Azure, which surpassed $100 billion in annual revenues in the fourth quarter of fiscal 2026, growing 41%. Broadcom itself acknowledges that workload migration to public clouds could limit demand for its virtualization portfolio.

Shares of Broadcom have gained 6.3% year to date, underperforming the broader Zacks Computer and Technology sector's 16.8% growth. AVGO trades at a forward 12-month price/earnings of 20.70X versus the sector's 20.65X. The Zacks Consensus Estimate for Broadcom's earnings is pegged at $3.22 per share, unchanged over the past 30 days, suggesting 90.53% growth.