Research · M&A · Forecast vs actual
Broadcom and VMware: The Plan Broadcom Didn't Buy
VMware's own forecast hit its first year almost exactly and was lagging in its second when the record stopped. Under Broadcom, the software segment's profit rose by up to nearly three times what VMware had planned to earn.
By Aref M. Bajwa · Published September 30, 2026 at 10:27 PM PDT
01 | The price
A price high in the cash-flow ranges
$139.69 sat 61-81% up both DCFs, above all trading and precedent ranges.
EXHIBIT 1 | Bank reference ranges vs. the $139.69 blended offer, $ per VMware share
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75
100
125
150
175
Implied value, $ per VMware share
Goldman DCF
J.P. Morgan DCF
Goldman PV of future price
Goldman EV/NTM EBITDA
J.P. Morgan trading (FV/UFCF)
J.P. Morgan precedents
Goldman premia paid (22-45%)
$100.80
$148.90
$109.00
$159.25
$92.30
$139.90
$99.10
$132.90
$78.75
$134.00
$98.00
$135.00
$116.80
$138.80
Offer $139.69
Unaffected $95.71
Cash-flow (DCF-type)
Trading
Precedents / premia
VMware DEFM14A (2022): Opinions of Goldman Sachs and J.P. Morgan; blended offer price as defined by J.P. Morgan (50:50 of $142.50 cash and 0.25200 Broadcom shares). Position in range computed: (price - low) / (high - low). $61bn and $8bn: Broadcom release, 26 May 2022. $86.3bn total purchase consideration: Broadcom 10-K FY2024. Premium computed.
The deal
Broadcom agreed on 26 May 2022 to buy VMware for $142.50 in cash or 0.252 Broadcom shares per VMware share, prorated half and half. Broadcom put the equity value at about $61bn, plus $8bn of VMware net debt. It closed on 22 November 2023, 545 days later.
The price check
J.P. Morgan's blended offer value of $139.69 sat 81% of the way up Goldman Sachs's DCF range ($100.80-148.90) and 61% up J.P. Morgan's ($109.00-159.25). It was above every trading and precedent range, and 46% above the unaffected $95.71 close of 20 May 2022.
What changed by closing
Half the consideration was set in Broadcom shares. At closing the stock portion was valued at $53.4bn, and Broadcom recorded total consideration of $86.3bn, against about $61bn at signing. Broadcom's release put the offer at $138.23 a share; the $139.69 above is J.P. Morgan's blended figure from the proxy.
02 | The forecast
What VMware's plan promised
Revenue up 42% and margin to 31% by FY2027.
EXHIBIT 2 | VMware management financial projections, FY2023E-FY2027E
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FY2023E
FY2024E
FY2025E
FY2026E
FY2027E
0
6
12
18
24
$bn
13.3
14.5
16.2
17.5
18.9
27.5%
28.5%
30.0%
30.5%
31.0%
Non-GAAP operating income
Unlevered FCF less SBC
Revenue
VMware DEFM14A (2022), 'VMware Management Financial Projections' and principal assumptions. Non-GAAP operating income excludes stock-based pay, amortization and other items. Margins and growth computed. Fiscal years end on the Friday nearest 31 January.
The plan
VMware management's projections ran from fiscal 2023 (the year to early February 2023) to fiscal 2027: revenue from $13.4bn to $18.9bn, and non-GAAP operating income from $3.7bn to $5.9bn.
The assumptions
A shift from perpetual licences to subscriptions and SaaS, with that revenue growing 26% to 37% a year through fiscal 2025; revenue growth of 9% and 11% in fiscal 2024 and 2025; and operating margin expanding to 30% by fiscal 2025.
What the banks did with it
Both banks ran discounted cash flow analyses on the plan at 7.5% to 8.5% discount rates with 2.0% to 3.0% terminal growth; Goldman used unlevered free cash flow less stock-based pay. In a DCF like this, the later years and the terminal value typically carry most of the value.
03 | Forecast vs actual
Year one landed; year two lagged
FY2023 hit plan; FY2024's first half grew at half the pace.
EXHIBIT 3 | VMware plan vs. reported: FY2023 levels and FY2024 first-half growth
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Revenue
Non-GAAP
op. income
0
4
8
12
16
$bn
+0.0%
+1.8%
FY2023: plan vs. reported
Revenue
Non-GAAP
op. income
0
4
8
12
16
Growth, %
9.0%
4.1%
12.9%
3.4%
FY2024: plan growth vs. first half
VMware plan (May 2022)
Reported
Forecast: VMware DEFM14A. Actuals: VMware Q4 FY2023 release (8-K, 2 Mar 2023) and Q2 FY2024 release (8-K, 31 Aug 2023), six months to 4 Aug 2023 vs. 29 Jul 2022; six-month non-GAAP operating income from the release's reconciliation tables. First-half growth is not a full-year result; required second-half growth computed as (14,546 - 6,685) / (13,350 - 6,424) - 1.
FY2023
Revenue was $13,350m, the plan's figure to the million, and non-GAAP operating income $3.74bn, 1.8% above. The plan was disclosed in May 2022, during the fiscal year, and FY2023 included a 53rd week.
FY2024, first half
In the six months to 4 August 2023, revenue grew 4.1% and non-GAAP operating income 3.4% from a year earlier. The plan had full-year growth of 9.0% and 12.9% (11.0% for operating income measured from the reported FY2023 base). Reaching the revenue plan would have needed second-half revenue 13.5% above the prior year.
Then the record stops
VMware's last earnings release covered the quarter to 4 August 2023. The deal closed in November, so the full fiscal 2024 was never reported on its own.
04 | Under broadcom
Broadcom's results outran VMware's plan
Software profit rose $15bn, nearly three times VMware's planned income.
EXHIBIT 4 | Broadcom software operating income vs. VMware's plan (fiscal years offset ~3 months), $bn
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FY2022
FY2023
FY2024
FY2025
0
6
12
18
24
$bn
5.2
5.6
14.0
20.8
4.8
5.3
VMware's own plan, non-GAAP op. income (FY2025E, FY2026E)
Segment op. income up to FY2023 level
Increase over FY2023 (mostly VMware)
Broadcom 10-K FY2024 and FY2025, segment information (fiscal years end on the Sunday nearest 31 October) and VMware Merger note ($12,384m revenue attributable to VMware in FY2024 continuing operations; EUC sold to KKR on 1 July 2024). VMware plan: DEFM14A. Increases and multiples computed: (segment OI - FY2023 segment OI) / VMware plan non-GAAP OI.
What Broadcom reports
Broadcom disclosed VMware revenue only for fiscal 2024. In that year, its first with VMware, $12.4bn of revenue was attributed to VMware, after selling the end-user computing business to KKR.
The segment
Broadcom's infrastructure software operating income went from $5.6bn in fiscal 2023 to $14.0bn in 2024 and $20.8bn in 2025, at a 77% margin. The increase over 2023 was $8.3bn and then $15.1bn.
Against VMware's plan
VMware's own plan had non-GAAP operating income of $4.8bn in fiscal 2025 and $5.3bn in 2026. The segment's increase was 1.7 and 2.8 times those figures.
Caveats
Fiscal calendars differ by about three months, and Broadcom's fiscal 2024 holds about 49 weeks of VMware. The increase includes any change in Broadcom's older software lines. Segment profit excludes stock-based pay and amortization (unallocated expenses), broadly as VMware's non-GAAP measure did. VMware's plan included end-user computing, which Broadcom sold. This compares profit levels, not like-for-like forecasts.
05 | Scorecard
Year one held; Broadcom replaced the plan
The test of the price is Broadcom's results, not VMware's plan.
EXHIBIT 5 | VMware forecast test
Computed from the figures on the preceding pages.
Result
The year VMware's plan was set came true almost exactly, and the next was running at about half the planned growth when reporting stopped.
The bigger story
Under Broadcom the business produced far more profit than VMware projected. That, not VMware's stand-alone plan, is the yardstick for whether the price was worth paying.
For the database
Like Activision and Hess, VMware stopped reporting on its own soon after its forecast was made. Unlike them, the buyer's segment reporting lets the outcome be read, if not tested like-for-like.
Sources: VMware DEFM14A (2022); VMware 8-K Ex. 99.1 earnings releases, 2 Mar 2023 and 31 Aug 2023; Broadcom 8-K Ex. 99.1, 26 May 2022; Broadcom Forms 10-K FY2024 and FY2025.
