Azure VMware Solution (AVS) Licensing: Broadcom VCF Changes, Costs and Alternatives

Azure VMware Solution Before and After Broadcom

Azure VMware Solution (AVS) was originally launched as a jointly developed, fully managed VMware environment running natively on Azure dedicated infrastructure. Microsoft managed the VMware software stack — including vSphere, vSAN, NSX, and VMware Cloud Foundation (VCF) — and included the VCF licence cost in the AVS node pricing. This meant enterprises could migrate VMware workloads to Azure without directly dealing with VMware licensing, simply paying the Azure node rate that covered both the hardware and the VMware software.

Broadcom's $61 billion acquisition of VMware completed in October 2023 fundamentally changed this equation. Broadcom ended all VMware perpetual licences in 2024, eliminating the perpetual model that had governed VMware pricing for decades. All VMware products — vSphere, vSAN, NSX, VCF, and the entire product portfolio — moved to subscription-only licensing. Support costs for organisations renewing VMware subscriptions through Broadcom increased by 3 to 5 times compared to pre-acquisition renewal rates, creating significant budget pressure across the entire VMware customer base.

The AVS model could not remain unchanged in this environment. Broadcom's new licensing terms required that VCF subscriptions be transacted directly by the end customer with Broadcom, rather than embedded within Microsoft's service pricing. The result is a fundamental change in how AVS is licenced and costed.

The Pre-October 2025 AVS Model

Before October 15, 2025, Microsoft sold AVS as a fully managed service where the VCF licence cost was embedded in the per-node Azure price. Customers paid a single Azure node rate that covered dedicated bare-metal infrastructure, the VMware software stack, and Microsoft's management of the environment. This model was straightforward and administratively simple — no separate VMware vendor relationship required for the cloud environment.

Organisations that purchased AVS Reserved Instances before October 15, 2025 are grandfathered under this model for the duration of their reservation term. Reservations can extend up to five years, meaning organisations that secured five-year reserved instances before the deadline can potentially operate under the legacy licence-inclusive model until 2030.

The Post-October 2025 AVS Model

From October 15, 2025, Microsoft stopped selling new AVS deployments with an included VCF subscription. All new AVS node purchases require the customer to provide a portable VMware Cloud Foundation subscription, purchased directly from Broadcom. The AVS node price itself is reduced — reflecting the removal of the embedded VCF cost — but the total cost is now determined by combining the Azure node rate with Broadcom's VCF subscription pricing.

For existing pay-as-you-go AVS deployments with an included VCF licence, Microsoft extended a grace period through October 31, 2026. After this date, existing PAYG customers must either migrate to the BYOL model with a Broadcom VCF subscription or transition to an alternative architecture.

The True Cost of AVS Under the New Model

Understanding the total cost of AVS under the Broadcom VCF subscription model requires modelling both components: the Azure node infrastructure cost and the Broadcom VCF subscription cost. Neither cost is trivial, and their combined impact on AVS TCO is substantial compared to the pre-acquisition model.

Azure AVS Node Pricing

AVS nodes are priced by node type and region. The most common deployment uses AV36 nodes, which are dedicated bare-metal hosts with 36 cores, 576 GB of RAM, and approximately 15 TB of vSAN storage capacity. Pay-as-you-go rates for AV36 nodes vary by region but are typically in the range of $10 to $14 per hour per node for standard Azure regions. Reserved Instance pricing provides significant savings — up to approximately 50 percent compared to pay-as-you-go rates for three-year reservations.

A minimum viable AVS deployment requires three nodes for vSAN redundancy, making the minimum infrastructure cost approximately $21 to $30 per hour for a three-node cluster at PAYG rates, or approximately $11 to $16 per hour on a three-year reservation — before any VCF subscription costs are added.

Broadcom VCF Subscription Costs

Broadcom's VCF subscription pricing is not publicly listed and is negotiated on a per-customer basis. However, the general structure prices VCF per core on an annual subscription basis. For AVS deployments, organisations procuring VCF portable subscriptions from Broadcom face subscription costs that, when combined with Azure node costs, typically result in total AVS costs that are 30 to 60 percent higher than the pre-2025 model depending on negotiated VCF rates.

This cost increase is the direct consequence of Broadcom's post-acquisition pricing strategy. The support and subscription cost increases of 3 to 5 times that Broadcom applied to on-premises VMware renewals in 2024 are being passed through, in varying degrees, to the AVS channel as well. Organisations that extended their on-premises VMware agreements expecting cost stability before an AVS migration will find that both environments have become materially more expensive under Broadcom's ownership.

AVS vs. Nutanix Cloud Clusters: The Alternative Comparison

For enterprise organisations evaluating their VMware-on-Azure strategy, the central question is whether AVS remains the optimal path or whether Nutanix-based alternatives or direct cloud-native Azure migration provide better economics and operational outcomes.

Nutanix Cloud Clusters on Azure (NC2)

Nutanix Cloud Clusters on Azure (NC2) runs the Nutanix AHV hypervisor on Azure bare-metal infrastructure, providing a VMware-alternative virtualisation platform natively in Azure. For organisations willing to undertake a hypervisor migration, NC2 offers several structural advantages over AVS in the post-Broadcom environment.

First, the AHV hypervisor is included in the Nutanix licence at no additional cost — there is no equivalent of the Broadcom VCF subscription overhead. Second, Nutanix's unified HCI stack combines compute, storage, and networking in a single administrative layer without the separate NSX and vSAN licensing complexity that characterises the VMware VCF model. Third, Nutanix provides tooling specifically designed for VMware-to-AHV migration, reducing the technical barrier for organisations moving away from vSphere.

The primary constraint of NC2 is the migration requirement. Unlike AVS, which allows VMware VMs to move to Azure without conversion (using vMotion across a stretched network), Nutanix requires workload migration to a different hypervisor. This migration carries risk and effort that must be quantified in any TCO comparison — but for organisations already planning a multi-year cloud migration programme, this is a one-time cost versus an ongoing premium for Broadcom VCF subscriptions.

Cloud-Native Azure Migration

The long-term path for most VMware workloads is modernisation to Azure-native infrastructure — Azure VMs, Azure Kubernetes Service, Azure App Service, and Azure PaaS components — rather than lift-and-shift VMware maintenance in any form. Cloud-native migration eliminates all VMware licensing costs entirely and unlocks Azure-native capabilities including auto-scaling, managed services, and native integration with Azure DevOps, Azure Monitor, and the full Azure service catalogue.

The economic case for cloud-native migration strengthens significantly after Broadcom's pricing changes. Organisations that previously accepted VMware extension as a cost-effective interim step are now facing 3 to 5 times higher VMware costs during what was intended to be a temporary bridge period. For workloads that are candidates for modernisation, accelerating the cloud-native migration timeline to avoid extended VMware subscription costs has become a financially compelling option.

Reserved Instances: The Key Cost Optimisation for AVS

For organisations committed to AVS as their VMware-on-Azure platform, Reserved Instances represent the single most impactful cost optimisation available on the Azure infrastructure component. AVS nodes reserved for one, three, or five years provide up to approximately 50 percent cost reduction compared to pay-as-you-go rates on the same node types.

The reservation strategy is particularly relevant in light of the October 2025 changes. Organisations that purchased five-year AVS Reserved Instances before October 15, 2025 preserved the legacy licence-inclusive pricing through 2030. For organisations buying new reservations after October 2025, the Reserved Instance applies to the infrastructure component only — the Broadcom VCF subscription is a separate annual cost that does not benefit from Reserved Instance pricing mechanics.

The practical implication is that new AVS Reserved Instance commitments provide meaningful infrastructure savings but do not lock in Broadcom VCF subscription rates. Organisations should model both components separately when evaluating multi-year AVS commitments: the Azure RI discount provides certainty on infrastructure costs, while Broadcom VCF subscriptions remain subject to annual renewal and potential price increases.

Five Recommendations for AVS Customers

1. Audit Your Current AVS Licence Status Immediately: Determine whether your existing AVS deployment uses the legacy VCF-inclusive model, PAYG with grace period through October 2026, or the new BYOL VCF model. Each status has different obligations, deadlines, and optimisation options.

2. Model AVS Total Cost Under the New Structure: Build a bottom-up TCO model that combines Azure node costs (at current RI rates), Broadcom VCF subscription costs at your negotiated rate, and Azure management and networking costs. Compare this total against the pre-2025 AVS cost baseline and against alternative paths including Nutanix NC2 and cloud-native Azure migration.

3. Engage Broadcom Directly and Negotiate VCF Subscription Terms: The Broadcom VCF portable subscription is a bilateral negotiation. Enterprise customers with substantial AVS footprints have meaningful leverage — particularly if they are simultaneously evaluating Nutanix NC2 as an alternative. Broadcom's VCF subscription discounts are available for customers who demonstrate credible competitive alternatives and negotiate proactively rather than accepting renewal pricing passively.

4. Evaluate Nutanix NC2 as a Strategic Alternative: Any organisation currently operating AVS at scale should commission a formal comparison of Nutanix Cloud Clusters on Azure against the new AVS total cost. The hypervisor migration effort is real but quantifiable. For workloads where the technical migration is feasible, Nutanix's inclusion of AHV at no additional cost eliminates the Broadcom VCF subscription overhead permanently.

5. Accelerate Cloud-Native Migration for Modernisable Workloads: For the portion of your VMware estate that is modernisation-eligible — workloads that can run on Azure-native compute and services without VMware dependencies — accelerating migration eliminates both VMware licence costs and the infrastructure overhead of maintaining an AVS cluster for those workloads. Broadcom's pricing changes have strengthened the financial case for prioritising cloud-native modernisation over VMware extension.