Broadcom acquired VMware for $69 billion and immediately killed perpetual licenses, forcing all customers onto subscriptions. The shift isn’t mysterious: subscription models command 10-15x revenue valuations versus 3-5x for perpetual licenses, and Wall Street rewards predictable recurring revenue with higher stock prices.
Why Wall Street Loves Subscriptions
The financial math behind this shift is straightforward. Software companies built on recurring subscription revenue typically command valuation multiples of 10-15x their annual revenue, while traditional perpetual license businesses trade at roughly 3-5x. That gap represents billions of dollars in market capitalization for a company the size of Broadcom.
Subscription models also eliminate what analysts call the “feast-or-famine” cycle. Under perpetual licensing, VMware’s revenue fluctuated based on when large enterprises decided to upgrade, sometimes every three years, sometimes every seven. Subscriptions smooth that curve into predictable quarterly cash flow, which Wall Street rewards with higher stock prices and more favorable analyst ratings. For Broadcom’s shareholders, the logic is airtight.
What This Means for Enterprise IT
The real-world impact is stark. Many organizations report subscription costs 300-500% higher than what they previously paid under perpetual licensing, with small and mid-size deployments absorbing the most dramatic increases. The minimum per-server license fee jumped from 16 cores to 72 cores in 2025, dramatically increasing costs for smaller deployments.
IT teams that once controlled their upgrade timelines now operate on Broadcom’s schedule, introducing potential compatibility risks with existing applications and workflows. Meanwhile, Broadcom has aggressively consolidated its partner channel. In the United States, only 19 VMware Cloud Service Providers reportedly remain out of what was once thousands. For organizations locked into VMware, the path forward involves difficult budget conversations.
