The ISO is free to download; the licence is not. Here is how Windows activation and licensing honestly work for VMs on ESXi - including the OEM rule almost everyone gets wrong.
Every ESXi beginner asks it sooner or later: the Windows in my VM is asking to activate - do I really need another licence? The short answer is yes, and the long answer matters, because the licence most people reach for - the OEM one from a physical PC - is the one that does not transfer. This page lays out the rules plainly so your lab stays fun and your office stays audit-clean.
Microsoft licenses Windows by installation, not by whether the machine is physical. A Windows VM on ESXi needs a valid licence of its own, and Windows will ask to activate exactly as it does on hardware. The disc or ISO being the same changes nothing; the licence is what you are short of, not the media.
Server licensing is core-based: you license all physical cores in the host (with a 16-core minimum per server). A fully licensed host with Standard edition covers two Windows Server VMs; run more Server VMs and you license the cores again in sets. Datacenter covers unlimited Server VMs on the licensed host. On top of that, the people or devices connecting need CALs, as they would with a physical server. Exact bundles and prices change - check the current Microsoft terms before buying - but that shape of the rule is stable: cores first, then VMs, then CALs.
An unactivated Windows VM does not stop working overnight, but it is not free Windows either: a permanent activation watermark, personalisation locked, and on Server, evaluation copies simply expire and shut down. In an office it is also an audit finding waiting to happen. Activate the VM properly at build time and write the licence used into your VM notes - future-you, rebuilding this host at midnight, will be grateful.
Every click shown live - creating the VM, loading the driver and installing VMware Tools.
Watch Full VideoIf that licence is OEM - the kind preinstalled on the laptop - no. OEM licences are tied to the original hardware. A separately bought retail licence can be used in a VM (one installation at a time), and volume licences are the normal route for office VMs.
Licensing is by host cores: license all physical cores (16 minimum) and Standard edition covers two Windows Server VMs on that host. More Server VMs means licensing the cores again in sets; Datacenter covers unlimited VMs. Users and devices connecting still need CALs.
No - it is behaving as designed. Evaluation editions are time-limited. Convert it with a proper licence key if the VM is becoming permanent, or rebuild it as a fresh evaluation for lab use.