First off, with German aid on the other side the Spanish Civil War goes to the socialists.
Second, everyone has a nice red scare. Mussolini is now a good guy. Japan takes the distrusted but necessary ally slot the USSR held OTL.
So Germany has gained Russia as an ally, but lost Italy, Finland, Romania, Bulgaria, Japan, and probably some others I've missed and had its neighbors start preparing for imminent war earlier. Belgium is back in the alliance with France and the original integrated defense plan is used, which IIRC prevents the Germans from accessing the Ardennes without a fight. Oh, and wasn't the remilitarization of the Rhineland after Hitler came to power? If Communist Germany does that it might provoke a war that Fascist Germany didn't because the Brits wanted them as a trade partner.
Also, there are consequences to implementing communism. Germany's advanced technology would evaporate as those who could fled and those who couldn't flee would not be getting paid for performance. It's hard to tell an engineer is shirking or conducting subtle sabotage if you aren't yourself an engineer.
I don't think Hitler's hand is improved here. Without Italy and Japan dividing British and French attention things are much harder in Norway and France. Surface raiders are pretty much impossible. U-boats require technical expertise that is no longer willing and may have fled the country. Without American trucks and trains, Russia's industry can not be devoted to military equipment the way it was OTL. I believe Baku will be bombed, seriously impacting Russian oil production. Without the Great Patriotic War, the USSR will suffer disloyalty and partisan attacks. Japan won't be denied cash and carry as long as it's fighting Russia and/or Mao and may get lend-lease if they're fighting Russia. Japan with Grant tanks fighting a Russia squeezing its logistics through a straw is not going to be easy to beat.