While many of the world’s top cloud providers are reporting flat or declining growth rates, Oracle CEO Safra Catz said her company’s cloud revenue growth will accelerate dramatically to about 50% in the fiscal fourth quarter, well above the staggering 45% just reported the three months ended on February 28th.
Think about it: In an economic environment characterized by restrained customer spending, longer purchasing decision cycles, and increased scrutiny of even strategic investments, Oracle’s cloud business grew 45% in the fiscal third quarter and is expected to grow between 49% and 51% % in fiscal year reach current quarter.
Growing 50% faster than any other Cloud Wars top 10 company
That means Oracle’s cloud business is growing 50% faster than the next two fastest-growing companies in the Cloud Wars Top 10: SAP at 33% and Google Cloud at 32%.
During the March 9 conference call, Catz and Ellison didn’t even mention declines in customer spending, delayed decision-making, or any such hesitation on the demand side.
On the contrary, both executives said that all parts of the Oracle Cloud business are performing reasonably well and that they expect continued strong demand.
“Cloud is no longer just about renting white boxes of goods — it’s about speed and value,” Catz said in her opening statement.
“We have become the enterprise technology provider of choice because we offer products and services that help our customers drive cost efficiencies and modernize their businesses.”
To support this point, Catz spoke at length about the role AI is playing in Oracle’s cloud growth drive, noting that Oracle has been embedding AI into its large portfolio of cloud services for years to deliver speed, insights, and productivity for customers increase.
“Although AI has dominated the recent news cycle, the truth is that our fusion and infrastructure customers have been using AI as an integral part of their business for some time,” said Catz.
“Oracle Fusion with embedded AI enables customers to close their books in days instead of weeks. Oracle AI provides more relevant sales leads and increases infrastructure performance and security without human intervention, and customers using OCI (Oracle Cloud Infrastructure) receive AI as a service to drive their own business transformation.
“Given our size and knowledge advantage across industries and technologies, we’re constantly training our applications to do more for our customers, whether that’s by further automating processes, providing critical and timely recommendations, providing insights, or flagging potential issues ‘ said Catz.
“This is real enterprise AI. It’s what customers are looking for. It’s built into everything we do and that’s what our customers get when they use our platform.”
Catz’ statement about how “AI has dominated the recent news cycle” was likely a reference to Microsoft-powered ChatGPT, and I don’t think it was a coincidence when he offered this extensive list of how AI drives innovation and productivity to Oracle Cloud customers, Catz doubled down with “This is real enterprise AI” and “This is what customers are looking for.”
Fun with ChatGPT
Ellison also had a little fun with the ChatGPT phenomenon later in the conference call when he attempted to put this highly disruptive Generative AI application into context.
“We have a healthcare partnership with MD Anderson Hospital and one of our independent software vendors called Ronin, where we create these disease-specific AI models that give physicians recommendations for care,” Ellison said.
“And MD Anderson has actually shown that with this system you can reduce hospital admissions and readmissions by 30%. That’s a staggering number.
“People talk about how ChatGPT is really cool because it can write my high school essay for me. Well, how about a 30% reduction in hospital admissions at MD Anderson? You decide what is more important.”
Strong growth across the board
Catz’s impressive Q4 guidance is based on impressive growth across all parts of Oracle’s cloud portfolio. Here are some Q3 details she offered:
- Total cloud revenue — that’s SaaS plus IaaS, including Cerner — was $4.1 billion, up 48% at constant exchange rates
- IaaS revenue of $1.2 billion, up 57% and SaaS revenue of $2.9 billion, up 44%
- Without Oracle’s legacy hosting business, that infrastructure number would be 65%
- Excluding Cerner, total cloud revenue grew 28% at constant currencies to $3.5 billion
- “Our strategic back-office SaaS applications are now at $6.2 billion in annual revenue and are growing 25% in constant currency, including Fusion ERP up 28% and NetSuite ERP up 26%.”
- OCI consumption sales increased by 86%
- Cloud@Customer usage revenue increased by 73%
- Autonomous database increased by 50%
- Cloud database services up 40%
- Database subscription revenue consists largely of on-premises database support, but as these databases migrate from on-premises to cloud and Cloud@Customer, we expect these cloud database services to be the third pillar of revenue growth alongside back-office SaaS and Gen2 OCI Cloud -Services
- Total revenue for the quarter was $12.4 billion, up 21% at constant exchange rates excluding the $1.5 billion contribution from Cerner
last thought
In recent earnings calls, Catz has emphasized how quickly Oracle can release financial results after quarter-end. In connection with her overview of how enterprise AI is accelerating business insights and operations, she made this comment: “Finally, before I move on to the numbers and hopefully no one missed this fact, for nine days we give our Earnings will be announced after the end of the quarter and we expect to file the Q immediately. We continue to set benchmarks in operational efficiencies that help customers see what is possible when they work with us.”
So 45% cloud growth in Q3 and forecast for cloud growth of 49% to 51% in Q4. Well done Oracle.
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