Broadcom Inc.

(NASDAQ Global Select)
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Bullish +55

Broadcom fought AT&T over VMware: Now a telecom giant is all in

Company update Customer growth New contract AI-generated analysis

🀝 NTT DOCOMO signed a historic 10-year deal to retain its private cloud on VMware Cloud Foundation, the first such agreement of its kind in Japan.

πŸ’° The contract covers the full VMware bundle including load balancing, vDefend security, Tanzu app platform, and strict VCF Forte Support targets.

πŸ›‘οΈ DOCOMO's commitment addresses fears of system outages by keeping embedded software stable during upgrades and traffic spikes.

πŸ“ˆ This deal validates Broadcom's strategy that AI processors are driving accelerated growth in their VMware business segment.

🏒 The agreement provides predictable licensing revenue to cushion Broadcom against the cyclical nature of its chip sales.

βš–οΈ The contract serves as a counter-narrative to AT&T's lawsuit, showing major carriers prefer staying with VMware over migrating.

πŸ“Š Infrastructure software revenue rose 29% to $8.75 billion in Q3, though it represents only 30% of total sales due to chip growth.

πŸš€ DOCOMO plans to evolve the platform for AI-driven threats and NTT's next-generation optical network project IOWN.

πŸ“‰ Broadcom shares remained flat on the news but maintain a Strong Buy consensus from 50 analysts despite trading below highs.

πŸ” The deal acts as a sales tool for Broadcom, citing a marquee carrier to encourage renewals with other telecom operators.

Bullish Signals
  • NTT DOCOMO signed a decade-long agreement to keep its private cloud on VMware Cloud Foundation, providing predictable licensing revenue.
  • The deal validates CEO Hock Tan's thesis that processors sold alongside AI chips are driving accelerated growth of the VMware business.
  • Infrastructure software revenue rose 29% to $8.75 billion in Q3, demonstrating strong demand for embedded solutions despite chip dominance.
  • DOCOMO's commitment extends a seven-year bet with VMware, creating a long-term moat against competitors seeking to exit the platform.
  • The contract includes strict service targets and dedicated account managers, enhancing customer stickiness and reducing churn risk.
Risk Factors
  • Broadcom faces lingering reputational risk from AT&T's lawsuit over licensing changes, though a settlement was reached in principle by December.
  • The deal does not immediately move stock price as investors focus on the massive $29.6 billion quarterly sales driven by AI chips rather than software contracts.
Full Analysis
Broadcom (AVGO) secured a significant strategic victory with NTT DOCOMO signing a decade-long agreement to keep its private cloud on VMware Cloud Foundation. This deal, announced in October 2026, marks the first such long-term commitment of its kind in Japan and involves the full VMware bundle, including load balancing, security, and Tanzu app platforms. The contract includes dedicated account managers and strict service targets, signaling a deepening reliance on Broadcom's software infrastructure rather than an exit. The agreement addresses critical concerns regarding system stability and migration risks that previously drove AT&T to sue Broadcom over licensing changes. DOCOMO's decision to extend its seven-year bet with VMware demonstrates that for major carriers, the embedded nature of the software makes unplugging risky during traffic spikes or upgrades. This move validates Broadcom's thesis that processors sold alongside AI chips are driving accelerated growth in their VMware business, effectively turning a potential vulnerability into a long-term revenue anchor. Financially, this deal provides predictable licensing and premium support revenue to cushion Broadcom against the cyclical nature of its semiconductor sales. While AI chip revenue dominates with $16.7 billion in the fiscal third quarter, infrastructure software revenue rose 29% to $8.75 billion. The contract serves as a marquee reference for Broadcom's sales team when renewing contracts with other operators, potentially influencing broader market sentiment regarding VMware's viability despite recent legal friction with AT&T.