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 in fiscal Q4 to about 50%, well above the eye-popping 45% it just reported for the three months ended Feb. 28.
Think about that: In an economic environment defined by restrained customer spending, longer purchasing-decision cycles, and intensified scrutiny on even strategic investments, Oracle’s cloud business grew 45% for fiscal Q3 and is expected to reach between 49% and 51% in the current quarter.
Growing 50% Faster Than Any Other Cloud Wars Top 10 Company
That means Oracle’s cloud business is growing 50% faster than either of the next two fastest-growing companies on the Cloud Wars Top 10: SAP at 33%, and Google Cloud at 32%.
During the March 9 earnings call, Catz and Ellison did not even mention pullbacks in customer spending, delayed decision-making, or any such hesitancy on the demand side.
Quite the contrary: Both executives said all parts of the Oracle Cloud business are doing quite well and that they expect strong demand to continue.
“Cloud is no longer about just renting commodity white boxes — it’s about velocity and value,” Catz said in her opening remarks.
“We have become the Enterprise technology vendor of choice because we have products and services that help our customers drive cost-efficiencies and modernize their businesses.”
To buttress that point, Catz spoke at some length about the role that AI is playing in Oracle’s cloud growth spurt, emphasizing that Oracle has been embedding AI across its large portfolio of cloud services for years to drive speed, insight, and productivity for customers.
“While AI has been dominating 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,” Catz said.
“Oracle Fusion with embedded AI enables customers to close their books in days, not weeks. Oracle AI provides more relevant sales leads and increases infrastructure performance and security with no human intervention, and customers using OCI (Oracle Cloud Infrastructure) get AI as a service to help drive their own business transformation.
“Given our scale and our information advantage across industries and technologies, we are constantly training our applications to do more for our customers, whether it’s further automating processes, providing critical and timely recommendations, offering insights, or flagging potential issues,” Catz said.
“That’s real Enterprise AI. It’s what customers are looking for. It’s designed into everything we do, and that’s what our customers get when they use our platform.”
Catz’s point about how “AI has been dominating the recent news cycle” was probably a reference to Microsoft-powered ChatGPT, and I don’t think it was a coincidence when, after offering that extensive list of how AI is driving innovation and productivity for Oracle Cloud customers, Catz doubled down with, “That’s real Enterprise AI” and “It’s what customers are looking for.”
Fun with ChatGPT
Ellison had a little fun with the ChatGPT phenomenon as well when, later in the call, he attempted to put that highly disruptive generative AI application in some context.
“We have a partnership in healthcare with MD Anderson Hospital and one of our independent software vendors called Ronin where we build these disease-specific AI models that make recommendations to doctors about care,” Ellison said.
“And MD Anderson has actually shown if you use this system, you reduce hospital admissions and readmissions by 30%. That’s a stunning number.
“People talk about ChatGPT being really cool because it can write my high-school essay for me. Well, how about reducing hospital readmissions at MD Anderson by 30%? You decide which is more important.”
Powerful Growth Across the Board
Catz’s stunning guidance for Q4 is built on the foundation of impressive growth across all parts of Oracle’s cloud portfolio. Here are some Q3 details that she offered:
- Total cloud revenue — that’s SaaS plus Iaas, including Cerner — was $4.1 billion, up 48% in constant currency
- Iaas revenue of $1.2 billion, up 57%, and SaaS revenue up $2.9 billion, up 44%
- That infrastructure number would be 65% without Oracle’s legacy hosting business
- Excluding Cerner, total cloud revenue was up 28% in constant currency at $3.5 billion
- “Our strategic back-office SaaS applications now have annualized revenue of $6.2 billion and grew 25% in constant currency, including Fusion ERP up 28% and NetSuite ERP up 26%”
- OCI consumption revenue was up 86%
- Cloud@Customer consumption revenue is up 73%
- Autonomous Database up 50%
- Cloud Database services up 40%
- Database subscription revenue is largely made up of on-premises database support, but as these databases migrate from on-premises to the Cloud and Cloud@Customer, we expect these Cloud Database services will be the third leg of revenue growth alongside back-office SaaS and Gen2 OCI Cloud services
- Total revenues for the quarter were $12.4 billion, up 21% in constant currency excluding Cerner’s contribution of $1.5 billion
Over the past few earnings calls, Catz has made a point of highlighting how rapidly Oracle is able to release financial results following the close of a quarter. In the context of her overview of the ways in which enterprise AI is accelerating business insights and operations, she offered this comment: “Finally, before I move to the numbers and hopefully no one missed this fact, we’re announcing our earnings nine days after the close of the quarter, and we expect to file the Q right away. We continue to set the standard in operating efficiency which helps customers see what’s possible when they’re working with us.”
So 45% cloud growth in Q3 and guidance for cloud growth of 49% to 51% in Q4. Well done, Oracle.
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