Oracle executives kept their latest quarterly earnings report more upbeat than those of their larger cloud vendor competitors, with less discussion around high inflation in the United States and potential for a recession and more talk around “exploding” demand for products that can handle machine learning (ML) and artificial intelligence (AI) workloads.
“AI and machine learning is a huge – exploding,” Larry Ellison, Oracle co-founder and chief technology officer, said during the question-and-answers portion of the company’s quarterly earnings call held Monday.
Ellison (pictured) continued: “You’re seeing a lot of machine learning and artificial intelligence workloads moving from other clouds to OCI because we‘re faster and, again, in the cloud business, faster – when you charge by the minute – faster means cheaper.”
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Oracle Reports Q2 Results
The Austin, Texas-based database and cloud products vendor beat its own quarterly revenue estimates by more than $200 million, CEO Safra Catz said on the call. Oracle Cloud Infrastructure (OCI) and Autonomous Database product sales helped fuel growth for the three months that ended Nov. 30, the second quarter of Oracle’s fiscal 2023.ADVERTISEMENT
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“What is increasingly resonating with customers is that in an environment where IT investments need to have a fast and tangible return on investment, only Oracle offers customers the flexibility to manage their technology estate so they can deploy incremental investments where it brings them the most immediate value,” Catz said on the call.
She continued: “More and more customers are recognizing our second-generation infrastructure cloud as being fundamentally better architected for higher performance, better security and unmatched reliability versus the older, first-generation hyperscale cloud providers.”
Amazon Web Services (AWS) and Microsoft – the No. 1 and No. 2 cloud computing vendors – detailed some deceleration and deal moderation during their most recentquarterly earnings reports.
Ellison named multiple customer wins for Oracle, including identifying some customers that he said Oracle won from competitors. Oracle, for example, beat enterprise applications rival SAP on a contract with Emirates Health Services and beat SAP and Workday on a contract with Cross Country Health, Ellison said on the call.
Italian bank Nexi and TD Bank replaced SAP products with Oracle ones, too, Ellison said. And genetics company Oxford Nanopore is moving gene sequencing and data analytics work off of AWS and onto OCI, according to Ellison.
Other customer wins during the quarter included battery maker Duracell choosing Oracle Fusion Cloud HCM over offerings from SAP and Workday, and the city of Bakersfield, Calif., choosing Oracle Fusion Cloud products over Infor, SAP, Tyler Technologies and Workday, according to Oracle.
CRN has reached out to AWS, SAP, Workday, Tyler and Infor for comment.
Oracle now has 22,000 infrastructure customers, 11,000 customers for its Fusion enterprise resource planning (ERP) and human capital management (HCM) products, and close to 30,000 customers of its NetSuite offerings, according to the vendor.
Ellison On Multi-Cloud, National Health Care Systems
Building off of comments Ellison made at Oracle CloudWorld 2022 about a growing demand for multiple cloud providers, the Oracle co-founder said that his company’s partnership with Microsoft is “going extremely well.”
Ellison told listeners on the company’s earnings call that some joint projects involving the two tech giants include customers Honeywell, the National Railway Co. of Belgium and Malaysian oil and gas company Petronas.
“We think the future of cloud is not four-walled gardens – AWS, Microsoft, Google and Oracle, “ Ellison said on the call. “We think those clouds are all going to interconnect and then customers will pick the most appropriate service for their particular needs and mix and match between the clouds.”
Ellison repeated his vision for Oracle to provide automated national public health systems and said that the company is working on contracts with different countries.
“These global public health systems need to be built,” he said. “And we are in discussions with, not companies, but countries, about building and deploying global early warning systems so we can detect the next pathogen that threatens to be turned into a pandemic. We can catch it early enough that we can prevent it from being a pandemic.”
He continued: “Humanity has to do a better job of delivering health care to people than we have done historically. And we can never have a repeat of the COVID-19 pandemic. And I think there is this worldwide sense of urgency and national consciousness about getting a new generation of systems out there that help us first prevent and then manage our health care – prevent a pandemic and better manage our healthcare systems. As far as I know, Oracle is the only company in the world that‘s trying to address this issue. And we’re about to sign up a number of countries that will work with us on doing just that.”
Ellison added a new aspiration for Oracle domination beside health care systems – business-to-business (B2B) commerce.
Oracle can bring an Amazon and Walmart level of automation to B2B commerce, Ellison said. Companies should have the ability to use an Oracle enterprise resource planning (ERP) system for a purchase, a sale, to borrow money for the deal and schedule the shipping and tracking.
“Our ambition here is to completely automate B2B commerce between buying and selling companies that are running Oracle Cloud ERP, and manage all of the financing and insurance and logistics associated with that transaction,” he said.
He continued: “That‘s a huge new business for us and our partners.”
OCI, NetSuite Grow In Q2
Oracle reported $12.3 billion in total revenue for the quarter, up 25 percent year over year ignoring foreign exchange.
Recent electronic health care systems acquisition Cerner contributed $1.5 billion during the quarter.
Cloud services and license support revenues were $8.6 billion, up 20 percent year over year ignoring foreign exchange.
Infrastructure cloud services revenue, excluding legacy hosting services, saw an annualized revenue of $3.8 billion, growing 69 percent year over year. OCI consumption revenue was up 88 percent. Cloud@Customer consumption revenue was up 83 percent. Autonomous Database revenue was up 50 percent.
Application subscription revenues, including support, were $4.1 billion, up 35 percent ignoring foreign exchange. Excluding Cerner, this measure was $3.3 billion, up 9 percent year over year.
Infrastructure subscription revenue, including support, was $4.5 billion, up 9 percent ignoring foreign exchange.
Strategic back office SaaS applications have an annualized revenue of $5.9 billion, up 26 percent ignoring foreign exchange. They grew 26 percent year over year. Fusion ERP application revenue was up 28 percent year over year.
Total cloud revenue was $3.8 billion, up 48 percent ignoring foreign exchange. About $1 billion of that revenue was from infrastructure-as-a-service (IaaS), up 59 percent year over year. Total cloud revenue includes IaaS and software-as-a-service (SaaS).
SaaS cloud revenue excluding Cerner was $2.2 billion, up 16 percent year over year.
NetSuite Cloud ERP sales contributed $600 million in revenue for the quarter, up 29 percent ignoring foreign exchange.
Oracle’s capital expenditures during the quarter were $2.4 billion, mostly geared toward meeting cloud demand. The company expects to spend the same amount over “the next few quarters” with no expected negative effect on operating margins, Catz said. The company is building nine more cloud service regions, currently boasting a total of 55.
Remaining performance obligation (RPO) balance is $61.2 billion, up 68 percent.
For the third quarter of Oracle’s fiscal year, Catz expects total revenue to grow between 21 and 23 percent ignoring foreign exchange. Cloud growth with Cerner should grow between 46 and 50 percent. Total cloud growth for the entire fiscal year minus Cerner should be more than 30 percent ignoring foreign exchange.
Foreign exchange rates should have a 4 percent negative effect on total revenue, Catz said.
Oracle’s stock on Monday traded at $82.97 a share, up about 2 percent after the market closed.