Enterprise AI to Boost Broadcom's Software Business? What Industry Data Shows

Key Points

• Broadcom CEO Hock Tan says AI adoption is becoming a growth driver for its VMware-anchored software business through private cloud deployments.
• Broadcom's infrastructure software revenue grew 29% year-over-year to $8.8 billion, though AI chip sales still dominate at 56% of total revenue.
• Mixed evidence from IDC, Kyndryl, and Hewlett Packard Enterprise offers only partial support for Broadcom's claim of accelerating private cloud AI adoption.

Broadcom’s NASDAQ: AVGO AI semiconductor business continues to be the dominant force behind the firm’s growth and the biggest narrative around the stock. However, chips are not the only area of Broadcom’s business where AI is supporting growth.

According to Broadcom’s CEO Hock Tan, AI adoption is also becoming an emerging growth driver for the company’s software business, anchored by VMware.

This comes as Broadcom believes enterprises will increasingly look to deploy AI in private cloud environments.

Of course, this is exactly what the management team of a company selling private cloud AI software would say. Testing the veracity of this claim requires looking at what players across the industry and third-party analysts are seeing.

The State of Broadcom’s Software Business

While Broadcom’s AI chip business consumes nearly all of investors’ attention, software is a very sizable part of its revenue base. AI chip sales grew 221% year-over-year (YOY) last quarter to $16.7 billion. Notably, at 56% of total revenue, this was the first quarter in which AI chips accounted for the majority of Broadcom’s revenue. In the prior quarter, AI chips accounted for 49% of total sales.

Meanwhile, infrastructure software grew by 29% YOY to $8.8 billion, accounting for 30% of total sales. While this is clearly much lower than its AI chip growth, it is still a strong increase for a large software business. Next quarter, Broadcom expects software revenue of $8.7 billion. This would be a sequential decline, but still a strong 28% YOY increase. Based on Broadcom’s guidance for next quarter, software’s share of total revenue would fall to a still significant 25%, while AI chips’ share would rise to 62%.

Tan Calls Out Private Cloud AI Opportunity

Looking ahead, Hock Tan said, “Enterprise consumption of AI is, in fact, opening a new opportunity for our infrastructure software business.” This is largely due to Broadcom’s perspective that enterprises are working to deploy more AI workloads in private clouds.

Private clouds describe environments where one company exclusively uses the computing resources. This is in contrast to public clouds, where multiple users share the same computing resources. Private cloud deployments offer greater data security, customization, and can provide more consistent performance and better cost control. Broadcom’s products, like VMware Private AI Cloud, can allow enterprises to deploy AI in private environments and repatriate workloads from public clouds.

Broadcom notes that in 2026, 56% of enterprises are running or planning to run production AI inferencing on private clouds. In turn, the percentage of those running or planning to run the same workloads on the public cloud fell from 56% in 2025 to 41% in 2026. It also says that 83% of organizations are considering repatriating workloads to the private cloud from public clouds. While offering greater security and control, Broadcom says that private cloud deployments improve total cost of ownership by three times compared to native public clouds.

What Other Sources Are Saying

Other evidence indicates that this shift toward the private cloud may be less strong than Broadcom suggests. Notably, in a 2025 survey conducted by IDC, the firm found that “organizations were deploying AI applications equally in both private and public clouds, at 49.9% and 50.1% respectively.”

Additionally, 63.6% of respondents expected more workloads to shift to the public cloud rather than the private cloud, directly contradicting Broadcom’s view. Analyst Mathew Flug does not see a massive repatriation to private clouds; rather, he sees the number of workloads increasing overall, indicating that the market for both private and public clouds is growing.

Commentary from cloud services company Kyndryl NYSE: KD aligns with this, with the firm seeing accelerating demand “in both public and private cloud." However, the company also provided more commentary that lends credence to Broadcom’s view. At the Citi 2026 Global TMT Conference, Kyndryl noted, “We are seeing now a bit of a resurgence in private cloud where five years ago, six years ago, seven years ago, private cloud had started to not shrink, but public cloud was more important in certain ways. Private cloud is kind of coming back now.”

Further supporting Broadcom’s view, Hewlett Packard Enterprise NYSE: HPE notes that orders for its private cloud AI (PCAI) business increased by triple digits last quarter.

What to Watch: HPE’s Private Cloud AI a Key Indicator

This evidence points to a more mixed view of the private cloud outlook. IDC’s commentary is least supportive of Broadcom’s view, although it still points to rising private cloud demand. Kyndryl’s commentary is in the middle, with the firm noting that private cloud is seeing a bit of a resurgence. On the other hand, HPE is seeing very strong demand for its PCAI offering. This provides significant support for Broadcom’s view that AI is increasing private cloud adoption.

Going forward, accelerating growth in Broadcom’s software business will be the best indicator of whether the firm is capturing this opportunity. Paying attention to commentary from forecasters like IDC and market participants like Kyndryl can help investors see where the market is going. These groups providing commentary that is increasingly favorable toward the private cloud would support Broadcom’s outlook.

However, tracking how HPE’s PCAI order growth evolves would likely be the best indicator, aside from Broadcom’s own results. This gives investors a metric that specifically measures private cloud adoption driven by AI, providing a way to gut-check Broadcom’s thesis.