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Earnings Roundup and More on Sovereign Cloud – Infrastructure Matters, Episode 43

Earnings Roundup and More on Sovereign Cloud - Infrastructure Matters, Episode 43

In this episode of Infrastructure Matters, hosts Steven Dickens, Camberley Bates and Krista Macomber discuss earnings performance from a variety of companies, as well as ongoing investments in sovereign clouds.

  • Key Points:
    • Coverage of earnings performance from:
    • Elastic
    • Lenovo
    • MongoDB
    • NetApp
    • Pure Storage
  • Oracle Cloud Infrastructure’s expansion into Morocco

You can watch the video of our conversation below, and be sure to visit our YouTube Channel and subscribe so you don’t miss an episode.

Listen to the audio here:

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Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this webcast. The author does not hold any equity positions with any company mentioned in this webcast.

Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.

Transcript:

Krista Macomber: Hello everyone, welcome to episode 43 of Infrastructure Matters. I’m Krista Macomber and I’m joined this week with both of my co-hosts, Camberley Bates and Steven Dickens. Camberley and Steven, how are you today?

Steven Dickens: Good. It’s getting the gang back together. We haven’t been all three of us in a while.

Camberley Bates: I know, I know. That’s true.

Krista Macomber: I know. Between travel and everybody’s schedules are, it’s that time of the year, right?

Steven Dickens: It’s crazy.

Krista Macomber: Yep, yep.

Steven Dickens: Got the chance to work with Camberley a little bit this week though. We seem to have been on a bunch of calls, which always makes me happy.

Camberley Bates: Little things that make you happy, Steve. I’m very glad it’s exciting for you.

Steven Dickens: Calls with Camberley is always a highlight of my day.

Camberley Bates: There we go, okay.

Steven Dickens: You’re not going to reciprocate, she’s just going to let that one slide.

Camberley Bates: Steve, we love you. We love you dearly. My brother in crime and technology. And you know brothers and sisters argue, right?

Steven Dickens: Yeah.

Camberley Bates: So to my friends out there that ever see us exchange a little bit, there we go.

Steven Dickens: Yeah, we’ve had a few testy, we cut to the grass with together each other.

Camberley Bates: Feisty, not testy, feisty. Can you take control of this Krista? Otherwise it’s going to go downhill. You’re the lead on this one.

Krista Macomber: I know. So with that, Steven, I know you had quite a few things this week you wanted to go over. I think first started starting by looking at MongoDB, so why don’t we kind of just jump in on that?

Steven Dickens: Yeah, so busy week for earnings, still seeing the tail end of earnings come through. So MongoDB announced earnings. Top line revenue up 22%. I think we’re starting to see these guys see AI come through into their numbers. Strong ARR growth, which was good. I think revenue increasing up here to, what was it, 450 million? Strong, strong growth. I mean, I think the way I’d contextualized this, and I’m literally writing an earnings note as we speak because they announced earnings last night and I was at our customer appreciation event so it’s kind of scramble into it and then jump on this call, I think the way I contextualize sort of the strong momentum is people are starting to reimagine their data stack for the tsunami of apps that are coming through AI and you’re starting to see that really good conversations with Oracle in this space as well.

So that what was probably, I don’t want to say a sleepy market in the database space because obviously Mongo has been disrupting that for a few years, but I think that a kind of normal trajectory of new fast moving entrants coming in, disrupting somebody like an Oracle. I think if I look at it now, we’re going to see that whole stack kind of be reimagined as AI drives and pulls that along, and Mongo’s well-placed for that. So I mean, that’s the way I’m looking at the earnings, I do not understand the equities guys at all because the stock is down this morning, but they seem to beat across the board from what I could tell, whether that’s just bad timing from being a tech stock with the market hitting a sort of pause right now. As I say, I never understand the equities guys and what happens the day after earnings get announced. Maybe that’s why I’m doing this and not picking stocks.

Camberley Bates: I know that’s why I’m doing it.

Steven Dickens: Yeah, yeah, I can understand the technology. I try and look at the markets and I’m like, “But none of this makes sense.” But strong set of numbers from MongoDB and a consistent trend.

Krista Macomber: Yeah, no, that makes a lot of sense and I think the comment regarding AI and how databases, how the requirements are shifting there, I think of course we’re obviously certainly seeing that as AI applications start to be used more frequently by enterprises and your comment regarding the ARR. I know the companies that I’ve been covering, I think, a key metric we’re really starting to look at across the technology space as we start to see some of these new delivery models. So it certainly makes sense from my perspective.

Steven Dickens: Yeah, I always look at two things, ARR, growth and then large customer growth within the numbers. So if you’re growing your ARR, that’s good, but you could be getting that from a bunch of small clients. If I see that growing and I see, some vendors do it as a percentage of revenue from clients above a particular size, some of them do it of revenue deals, clients over 100k or 250k. There is no consistent measure of what’s a big client for a vendor, but they are consistent quarter to quarter mentioning that number.

So I look for that trend as well. And then we’ve obviously got rule of 40 growth as a kind of north star, but if you’re looking for those sort of three things, that’s a pretty good way of looking. As I say, I don’t know what the equities guys look at, but that’s what I’m tending to be looking at.

Krista Macomber: Oh yeah, absolutely makes sense. So why don’t we continue our earnings tour. Camberley, I know you looked at both NetApp and Pure over the past week from an earnings perspective, correct?

Camberley Bates: Yeah, so I’ll take on Pure since they were the first ones out the door and if you would allow me to take a look at my notes wherever my notes are, there they are. Revenue was up, about a double-digit revenue growth. They hit a number of 693, which was below where they expected to be in terms of their areas. The revenue and subscriptions is good, although it had a bit of a slow-down, a little bit less than what they expected. I don’t know if they’re saturating the market or not. I’m going to be curious to see, we see that trending and subscription, but as a service capability, how they absorb it. There’s customers that really like the CapEx strategy, there’s customers that really like the storage as a service strategy.

So we’ll see where that balances out over time and I know there’s certain companies that are heavy down on that kind of space but I think there needs to be a blend in the strategy there. As we would expect, they are very focused on the AI workload demands, although as I think as Charlie Giancarlo had said, while they’re seeing some evidence of the AI workload demands, it hasn’t done this huge uptick that we’ve seen in the server environment and probably starting also in the network environment. It’s still kind of like, it’s getting there, but it hasn’t really kicked in and that’s kind of consistent with what we’re hearing from some other people in the market space.

What I will comment on is there’s two areas that Charlie is seeing some big areas for the AI and that is one in the large public or private GPU farms that where they’re setting up these big areas, and I know we’ve talked to Lenovo and they’re definitely focused on that place. The second area is the inference engine and the RAG environments. Again for most of the companies, the inference engine market seems to be where we all are looking to say, “Okay, so after we get all this training, then we got to deploy it, we’re deploying it at the edge, we’re deploying it at every retail store, every supermarket, every mining area.” So that’s where the big uptick will be.

A couple of other items, and FlashBlade had a good Q1 which was also including AI workloads, so that’s good to see that that’s continuing to uptick. And they’re doubling down on their high capacity QLC system, which is growing significantly and I’m sure what it’s doing is taking out more of the HTD market that’s out there as well. So I will pause there because otherwise I’m going to be really boring people here if I just keep on going through all of this and see if there’s any questions or any comments from anybody.

Krista Macomber: Yeah, I think as you’re alluding to, Camberley, I think a lot of components at play. I think for me personally, your comments on FlashBlade always are interesting as I kind of tend to look at those protection environments. I’m still catching up on Pure’s earnings, did they mention anything around Portworx or sort of the container protection play there? That’s one thing that I’ve been trying to keep an eye on myself.

Camberley Bates: It’s mostly been focused completely on the other core areas that there not a whole lot on the Portworx or at least not grabbing one right now off the top of my head so I can’t comment on it.

Krista Macomber: That makes sense.

Camberley Bates: On the NetApp side, they did exceed the midpoint of their guidance, although year over year they were slightly down just like a 1%, but quarter over quarter they’re up 6%, which is good. And this is kind of a similar trend I’m seeing coming out of the other vendors, which is a heavy focus on platform. And one of the nice things about NetApp is cited a couple wins based upon platform. In particular, there is one very large customer that they went into that was going to be buying block and file two separate vendors, two separate environments, and they have bought all of it from one vendor.

And that is because there’s a platform approach. And what I mean by platform approach is that there’s the UI, the infrastructure, user interface infrastructure enables them to manage both those environments. And then for NetApp, there’s definitely some synergies between those two technologies where they can within their snapshot capability, their data protection capabilities that they have for the system. So that’s a pretty powerful play. We’re seeing that same theme coming out of the other companies, particularly you see that out of kind of Pure talking about their purity software and being that single platform piece. What that does is it streamlines the operational pressures that are on the client, on the customer base and helps them through what we’re doing right now is not enough staff to do the things you want to do.

We saw one of the things they highlighted at NetApp was their storage as a service offering had an uptick up until this time, they’ve kind of been quiet about it, but this definitely has seen an uptick with them. So I think they’ve got plenty of room to grow within their client base to penetrate in terms of offering the service, which is using it by the gigabyte by the bite kind of thing. They too, like everybody else, really hammered down about where they are with their AI space. One of the values, the big competitive positions that they highlight is there they are the largest file system that’s out there. They were the original guys that were out there as network file system so they’ve got this very strong play in that space.

So they do have the ability to go in there and say to the customers, “Oh, we have this. Let’s expand this out into the other use cases or the other environments. You already know us, you already trust us,” which is a powerful play as opposed to a competitive win where you got to take it out and convert and all that kind of stuff. So we’ll see how that competitive game plan pans out.

Steven Dickens: Just on the file system stuff, I saw a really great demo of NetApp with Vertex from Google exactly on that plan. It stood out for me. I’ve had hundreds of demos over the last year on AI, it seemed that one of the simplest ways to untap and tap into your corpus of data that’s in your storage systems today, all of this file information and put that up to a large language model and be able to have it run off your data in a private environment rather than have to move that data to the cloud to then put it in a cloud-based LLM model. So I’m with you there, Camberley. That makes a lot of sense for me and I think given where they are from a file perspective and the file service base, as we start to see AI get deployed more in enterprises in private deployments, I think that might be an interesting dynamic to watch.

Camberley Bates: Yeah, and there’s going to be a trade-off of performance to what I’m familiar with, the capabilities scale, all those will come to play. Also price, which we’ll see.

Steven Dickens: Just a little minor thing that often matters, right? How much does it cost?

Camberley Bates: And it just depends upon how big this data’s going to end up getting that we have out there.

Steven Dickens: But I mean, bringing the AI to the data rather than taking the data to the AI is a trend I’m seeing more and more. So I think given that the amount of file data that NetApps have got, that’s pretty important I think.

Camberley Bates: Yeah, and he also said, George Curian also talked about how we’re only in the beginning stages of this, so they haven’t really-

Steven Dickens: His brother might disagree though, what do you think on the two angles of that?

Camberley Bates: Well, I mean if you read them through, there’s some similar threads that you see along those, and since we’re sitting on these guys back to back, it’s kind of like, “Okay, I heard that one. Okay, I heard that one there. Let’s match these. There’s a line here.” The last thing I will-

Steven Dickens: One wanted to take it all to the Google cloud, the other brother wants you to keep it all on-prem on a NetApp filer, which one’s going to work?

Camberley Bates: There you go. The last one I’ll mention is we’ve heard, again, they’re seeing several environments where customers are looking at their hyper-converged VMware landscape looking to optimize their VMware licenses and are coming in so that what they’re coming into with is their C series, which is the QLC device, which it’s not a lower end device, it would be a lower end than a TLC kind of environment in terms of possible performance but this new system comes in there as a very cost performer. And so this again, okay, so they’re seeing that everybody else we’re talking to, “Okay, here’s the PS services for VMware conversion, here’s the Nutanix strategy, here’s the Dell strategy, here’s the HPE strategy.” Okay, Hawk, we’ll see what you’re going to end up doing at the end of the year, right?

Steven Dickens: Optimize your VMware licenses is code for a lot of people right now.

Camberley Bates: And I also actually really believe that Hawk is perfectly fine with seeing this optimization going on. So it’s not that he didn’t see this coming, this is no new news to him. So anyway…

Camberley Bates: With that, I will turn it back to the lovely Krista to go to the next one.

Krista Macomber: Yeah, I think we have a couple more earnings, believe it or not. I know Lenovo, right? Steven, I know, it is one you were kind of talking about before we hit record here.

Steven Dickens: Yeah, so Camberley and I literally just came off a call with Kirk Skaugen, who’s the SVP over there responsible for infrastructure. Always look forward to those calls. Kirk is one of the best and the brightest.

Camberley Bates: Okay, can I say storage again?

Steven Dickens: You can say storage. Take it off me.

Camberley Bates: I’m going to say two things about storage. For those that don’t know, they are number one in the entry market and they’re number three in worldwide market for storage in terms of the revenues according to IDC. So turn it over to you, there you go. Because people don’t realize that, they don’t realize it.

Steven Dickens: Take that up one level and agree, I mean, the mix of non PC revenue, 45% non PC, I think a lot of people think of Lenovo as a PC company, that’s where they started. I don’t think people are giving them the credit of where they are from a perspective around their enterprise space. Kirk does a fantastic job. We just got a 45 minute sort of masterclass in a senior exec knowing their numbers. I think for me, Camberley hit it really well, storage, I see these guys on a path to getting to number two. How they do that, they’re going to have to invest in the marketing, they’re going to have to double down. See some really good things with their One Lenovo strategy around how they’re investing in their salesforce to be able to sell the complete mix.

So I think obviously AIPC is starting as a megatrend, so that’s going to be interesting to see that come through. I think we’re early days on that. We’re starting to see a lot of innovation from Qualcomm and Broadcom and another players in that ecosystem so that’s going to be really interesting. One of the things that also stood out from our conversation, fastest growing Android phone, the flip phones, the Motorola Razr is back. So Kirk’s not the expert on that, that’s other people in his business, but his face lit up when he talked about that, I think.

Camberley Bates: He was obviously very proud of their position and where they are.

Steven Dickens: Yeah. I mean, they talk about pocket to cloud and we spent a whole bunch of time, we didn’t talk about Motorola Razr, there’s other people in our team that covers that, Olivier Blanchard is the guy. So I wrote a coverage note with him on that because he covers the sort of PC and devices. But I think the other interesting piece, and I’d love to get your perspective because we haven’t had a chance to chat, it was literally just before this, that whole ODM versus OEM dynamic. Lenovo is a ODM provider into cloud companies so they’re providing into the Microsoft as your stack, they’re providing into AWS, they’re going into Google, they’re going into Alibaba, all these guys as an ODM provider, and then they obviously sell to enterprises as an OEM provider. Dell and HPE don’t do that.

Camberley Bates: Well, no.

Steven Dickens: Or not so much.

Camberley Bates: HPE got out of that business.

Steven Dickens: Yeah, yeah.

Camberley Bates: They got out of the business because it is a very low margin business and you have to have, this gets it back into what are you doing? And if you are in a high-touch business providing services, doing what HPE does, that’s too difficult to manage. Those are two different types of companies that you’re managing. Lenovo has got the chops to do that because that is what they’re designed to do. If you look at that, their storage business is not necessarily, they haven’t developed the storage software, what they are doing is they are selling others peoples, but they’re extremely good at doing what they’re doing and getting it to the market.

So you can almost look at this company as this manufacturing engine, a lot of Intel people are over there, right? Manufacturing engine, that’s PCs, servers, et cetera, that can customize at scale. And they are a big distribution company because they’re 100% channel focused, that’s what they do. And they know how to do this and they know how to do custom. So if you look at what’s going on in their HPC side of the house, a lot of that when you’re building out for a big research facility, that’s all custom kind of work. So they know how to do this and they know how to do this at scale.

And then that goes into what he was talking about in terms of all their investments in different countries. They just announced the big relationship that they’re going to have with the Crown Prince Saudi Arabia. They’re going to build a plant there for manufacturing. They’re going to move their headquarters to Riyadh. I mean, this is all very big investments they’re making, but it’s investments on what they do and do really well, which is that manufacturing side of the house.

Steven Dickens: Well, I mean the one data point that stood out for me, 600 motherboard engineers.

Camberley Bates: Yes.

Steven Dickens: I mean, that’s not a tiny team. That’s a big team going after design wins. That’s significant investment with AMD and Intel. They’re doing, as Camberley said, these custom systems with the cloud providers. That’s a moat. If you’re a HPE or a Dell or a super micro, just getting the 600 smart people to come and join your team to give you that capability is not something you can build in a moment’s notice. So really impressed. I always come off buzzing after my calls with Kirk because the guy is just a masterclass in knowing where the business is going, having the numbers at his fingertips. So always come away impressed from those calls with Lenovo.

Krista Macomber: Yeah, absolutely, absolutely. So I know we had a couple other things we wanted to touch on quickly, Steven, that you brought up being Elastic if you want to pivot.

Steven Dickens: Yeah, run fast through Elastic. Again, another one that dropped last night, so trying to sort of get that through. Again, one of the key metrics here was annual contract value. Elastic tracks that deals over 100k. They’ve now got 1,330 customers spending more than 100k with them annually, I think given where they are as an open source company, that’s interesting. Elastic Cloud revenue topped 148 million in Q4, that’s a 32% year increase. So some high level metrics there. This company’s really well-placed. There’s three areas that Elastic focuses. They’re focused on the security space, they’re focused on AI and they’re focused on observability. All those markets are growing. So not a super big name, Ash Kulkarni’s doing a great job there as CEO of getting out and trying to tell that story. Daniel’s had him on Making Markets a couple of times talking about earnings, I’ve spoken to, I think-

Krista Macomber: I did a video with them at RSA as well a couple of weeks ago.

Steven Dickens: Yeah, so they’re doing a good job of getting the story out. I think for me, being exposed to those three markets that are growing so quickly, if they can get their stories straight and continue as they are on getting that message out, I mean, there’s work to do on profitability, but I think overall I’m bullish. But again, I’m not an equities guy, I just look at the technology trends and kind of where they’re exposed. I think they’re in good shape.

Krista Macomber: Yeah, no, I agree. I mean, I’m very positive in terms of what they’re doing in the Security Operations Center and how they’re really positioning against some of these traditional SIM tools. So I would definitely agree with you, Steven.

Steven Dickens: Yeah, I need to check out your video. You need to send me that offline. I didn’t see that one.

Krista Macomber: Yep, yep. Definitely, we’ll include that in the show notes for sure as well. And I know we have maybe two minutes we can do a quick drive by regarding Oracle Cloud infrastructure in Morocco. I know Steven, that was one more item you wanted to touch on today.

Steven Dickens: Yeah, another announcement for Sovereign Cloud and just keep seeing this trend of we’ve had AWS in Japan, we’ve had Oracle in Japan, we’ve had IBM in Canada, we’ve now got OCI in Morocco. The interesting one for me is this is the first cloud provider in North Africa, so don’t often hear about the cloud providers investing in Africa. We just heard about Lenovo investing in Middle East, but we don’t often hear about Africa. So good to see that just from a geopolitical point of view, I’m always a big fan investing in other parts of the world. But I’m really interested with what Oracle’s doing around Sovereign Cloud. I think what they’re doing with Alloy, what they’ve got with cloud at customer, some interesting stuff. So I’m trying to get a more detailed briefing out of the guys on Oracle because there’s a thread there that I want to pull on around what they’re doing in Sovereign Cloud.

Krista Macomber: Perfect. All right, and with that, we are officially out of time. Camberley, Steven, thank you. It’s always a great way to kind of kick off our Friday here and wrap up the week. And thank you to our listeners. Make sure that you like and subscribe so you don’t miss any future episodes. We’re here recording every single week. And thank you again, and we look forward to seeing you on the next episode.

Author Information

With a focus on data security, protection, and management, Krista has a particular focus on how these strategies play out in multi-cloud environments. She brings approximately a decade of experience providing research and advisory services and creating thought leadership content, with a focus on IT infrastructure and data management and protection. Her vantage point spans technology and vendor portfolio developments; customer buying behavior trends; and vendor ecosystems, go-to-market positioning, and business models. Her work has appeared in major publications including eWeek, TechTarget and The Register.

Prior to joining The Futurum Group, Krista led the data center practice for Evaluator Group and the data center practice of analyst firm Technology Business Research. She also created articles, product analyses, and blogs on all things storage and data protection and management for analyst firm Storage Switzerland and led market intelligence initiatives for media company TechTarget.

Krista holds a Bachelor of Arts in English Journalism with a minor in Business Administration from the University of New Hampshire.

Regarded as a luminary at the intersection of technology and business transformation, Steven Dickens is the Vice President and Practice Leader for Hybrid Cloud, Infrastructure, and Operations at The Futurum Group. With a distinguished track record as a Forbes contributor and a ranking among the Top 10 Analysts by ARInsights, Steven's unique vantage point enables him to chart the nexus between emergent technologies and disruptive innovation, offering unparalleled insights for global enterprises.

Steven's expertise spans a broad spectrum of technologies that drive modern enterprises. Notable among these are open source, hybrid cloud, mission-critical infrastructure, cryptocurrencies, blockchain, and FinTech innovation. His work is foundational in aligning the strategic imperatives of C-suite executives with the practical needs of end users and technology practitioners, serving as a catalyst for optimizing the return on technology investments.

Over the years, Steven has been an integral part of industry behemoths including Broadcom, Hewlett Packard Enterprise (HPE), and IBM. His exceptional ability to pioneer multi-hundred-million-dollar products and to lead global sales teams with revenues in the same echelon has consistently demonstrated his capability for high-impact leadership.

Steven serves as a thought leader in various technology consortiums. He was a founding board member and former Chairperson of the Open Mainframe Project, under the aegis of the Linux Foundation. His role as a Board Advisor continues to shape the advocacy for open source implementations of mainframe technologies.

Camberley brings over 25 years of executive experience leading sales and marketing teams at Fortune 500 firms. Before joining The Futurum Group, she led the Evaluator Group, an information technology analyst firm as Managing Director.

Her career has spanned all elements of sales and marketing including a 360-degree view of addressing challenges and delivering solutions was achieved from crossing the boundary of sales and channel engagement with large enterprise vendors and her own 100-person IT services firm.

Camberley has provided Global 250 startups with go-to-market strategies, creating a new market category “MAID” as Vice President of Marketing at COPAN and led a worldwide marketing team including channels as a VP at VERITAS. At GE Access, a $2B distribution company, she served as VP of a new division and succeeded in growing the company from $14 to $500 million and built a successful 100-person IT services firm. Camberley began her career at IBM in sales and management.

She holds a Bachelor of Science in International Business from California State University – Long Beach and executive certificates from Wellesley and Wharton School of Business.

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