The News: Oracle Corporation announced fiscal 2024 third quarter (Q3) results. Total quarterly revenue was up 7% year-over-year (YoY) in both USD and constant currency to $13.3 billion. Cloud services and license support revenue were up 12% in USD and up 11% in constant currency to $10.0 billion. Cloud license and on-premises license revenue were down 3% in both USD and constant currency to $1.3 billion. Read the full press release from Oracle on the company’s website.
Oracle Fiscal 2024 Q3: Results Fueled by Cloud and Generative AI Surge
Analyst Take: Oracle delivered impressive fiscal 2024 Q3 earnings spotlighted by massive new cloud infrastructure contracts signed in Q3 spurring Oracle’s total Remaining Performance Obligations (RPOs) up 29% to over $80 billion and delivering a top line and earnings per share (EPS) meet and beat. Oracle CEO Safra Catz emphasized that Oracle’s new RPO count represented an all-time record for the company.
Oracle expects to continue receiving large contracts reserving cloud infrastructure capacity because the demand for its Gen2 AI infrastructure considerably exceeds supply, despite the swift opening of new and expanding existing cloud data centers. As a result, Oracle anticipates that 43% of the company’s current $80 billion of RPOs will be recognized as revenue over the next four quarters, and that its Gen2 Cloud Infrastructure business will remain in robust growth mode–up 53% in Q3–for the foreseeable future.
According to Oracle Chairman and CTO Larry Ellison, Oracle’s Q3 performance is further strengthened by Oracle finishing moving most Cerner customers to Oracle’s Gen2 Cloud Infrastructure. In Q4, Oracle will start delivering its new Ambulatory Clinic Cloud Application Suite to the same customers. This new AI-driven system features an integrated voice interface called the Clinical Digital Assistant that automatically generates doctor notes and updates electronic health records–saving precious time and improving health data accuracy. The delivery of this new healthcare technology can enable the swift modernization of Oracle’s customer health systems over the coming year, and potentially transform Cerner and Oracle Health into a high-growth business for years to come.
Key Q3 fiscal 2024 cloud-related results include:
- Cloud revenue (IaaS plus SaaS): $5.1 billion, up 25% in USD, up 24% in constant currency
- Cloud infrastructure (IaaS) revenue: $1.8 billion, up 49% in both USD and constant currency
- Cloud application (SaaS) revenue: $3.3 billion, up 14% in both USD and constant currency
- Fusion cloud ERP (SaaS) revenue: $0.8 billion, up 18% in both USD and constant currency
- NetSuite cloud ERP (SaaS) revenue: $0.8 billion, up 21% in USD, up 20% in constant currency
From our perspective, the 49% YoY IaaS growth indicates Oracle is gaining share in the global cloud market at a positive rate that is currently out-clipping most of the cloud providers. Plus, Oracle’s IaaS/cloud application SaaS 25% YoY growth is remarkable, further validating its aggressive Gen2 Cloud Infrastructure build-out. Short-term deferred revenue was $8.9 billion. Over the past 12 months, operating cash flow was $18.2 billion and free cash flow was $12.3 billion.
In our assessment, Oracle is primed to drive generative AI innovations that can further expand the ecosystem-wide influence of Oracle’s Gen2 Cloud. We see Gen2 Cloud as the top choice for running generative AI workloads because Oracle has demonstrated the highest performance, lowest cost GPU cluster technology on a global basis.
Oracle’s GPU clusters are built using what the company asserts is the highest bandwidth and lowest latency RDMA network that is designed to scale up to 32,000 GPUs. As such, large language model (LLM) development firms such as Mosaic ML, Adept AI, and Cohere are high-profile AI development companies that have adopted Oracle’s Gen2 Cloud.
Additional key financial highlights consist of Oracle’s Q3 GAAP operating income at $3.8 billion. Non-GAAP operating income was $5.8 billion, up 12% in both USD and constant currency. The GAAP operating margin was 28%, and the non-GAAP operating margin was 44%. GAAP net income was $2.4 billion. Non-GAAP net income was $4.0 billion, up 18% in both USD and constant currency. Q3 GAAP EPS was $0.85 while non-GAAP EPS was $1.41, up 16% in both USD and constant currency.
Oracle FY 2024 Q3 Results: Why Oracle’s Cloud and Generative AI Business Is Flourishing
From our perspective, Oracle is consistently generating worldwide ecosystem-level cloud momentum through its sustained portfolio-wide innovation. In March 2024, Oracle unveiled the general availability of Oracle Globally Distributed Autonomous Database aimed at enabling organizations to automatically distribute and store data across the planet in many physical locations transparently to applications. With this approach, customers can attain breakthrough scalability and availability, fulfill data sovereignty edicts, and benefit from autonomous operations, substantially decreasing costs.
We see Oracle bringing serverless and pay-per-use Autonomous Database innovations to the world of distributed databases and changing the dynamics of the competitive landscape. For example, from fault-tolerant Exadata to Active Data Guard in-country replication, Oracle meets the strictest high-availability and disaster recovery SLAs–and other distributed database providers cannot match it. And for data distribution methods, Oracle supports six sharding methods, while Google Spanner and CockroachDB support only one. Clearly Oracle has surpassed the competition and their rather constrained distributed database capabilities.
In February 2024, Oracle unveiled its Autonomous Database Select AI with the strategic goal of enabling developers to create AI-enabled applications that can unlock private enterprise data through the capabilities of generative AI and machine learning (ML). To achieve such a major objective, Oracle is bringing AI to an organization’s data, which is consistent with Oracle’s converged database approach. Essentially, with Autonomous Database Select AI, workforces converse with data using natural language–there is no need for them to write SQL queries or understand the intricacies of how or where their data is stored to gain insights.
We find that the new enhancements to Autonomous Database reflect Oracle’s ongoing commitment to provide the tools customers need to integrate AI and ML into their applications, allowing workforces to swiftly gain insights from data and make timely business decisions. However, it is the new contextual conversation capabilities that is the attention grabber. When it comes to having a conversation with data, workforces just want to have a real-world type of dialogue–not dealing with coding, complex interfaces, or manually copying and pasting from one form to another.
Plus, in January 2024, Oracle rapidly elevated its generative AI game with the general availability of its Oracle Cloud Infrastructure (OCI) Generative AI offering as well as beta offerings of OCI Generative AI Agents and OCI Data Science AI Quick Actions. The new OCI offerings are built to fulfill the primary strategic goal of enterprises to use generative AI to rapidly process relevant data with natural language. Key details include that OCI generative AI service is a fully managed service that integrates LLMs from Cohere and Meta Llama 2 to address a wide range of business use cases.
Integral to the OCI Generative AI proposition are the OCI retrieval augmented generation (RAG) agents available in beta that act on knowledge bases such as search indexes. For instance, this extends to call transcripts, internal knowledge sources, and other large corpuses of enterprise proprietary data. Upcoming generative AI agents include information retrieval capabilities enabled by agents that connect to customer data sources with beta support for OCI OpenSearch in January 2024. Next, during H1 2024, RAG with Oracle Database 23c AI Vector Search and MySQL HeatWave Vector Store ensure agents can go beyond information retrieval tasks and call APIs on the customer’s behalf with the potential to automate a variety of tedious tasks.
Ultimately, there is RAG and then there is RAG done right. With its latest generative AI innovations, Oracle has delivered RAG the way that enterprises want to consume it—by prioritizing data management, security, and governance to help ensure enterprise-grade AI. Enterprises can immediately engage the OCI Gen AI RAG service to act on call transcripts, troves of PDF statements, internal knowledge sources, and extremely large corpuses of proprietary corporate data—while a ReRanker adjusts outputs to best match individual user queries. OCI RAG is now available in beta with OpenSearch, and once it becomes available on Oracle Database 23c with AI Vector Search and MySQL HeatWave Vector Store, the competitive advantages that customers can obtain will further transcend the boundaries of competitive offerings.
Moreover, delivering real-time communications to its suite of industry cloud applications, Oracle unveiled the Enterprise Communications Platform (ECP) in the lead up to MWC 2024. By connecting Oracle industry applications to networks and IoT devices to extend their value, we see that ECP can enable organizations to implement use cases that improve business outcomes. Built on OCI, ECP can deliver a communications backbone and edge architecture that users can embed directly into their Oracle industry applications stack.
Key Takeaways: Oracle Fiscal 2024 Q3 Results Validate Cloud and Generative AI Perspicacity
Overall, we find that Oracle’s fiscal 2024 Q3 results are generating competitive waves across the global cloud market because the results validate that the company is a vital player in powering innovation and accelerating adoption across the cloud and AI ecosystems as advances in AI and ML move at unparalleled speeds. In meeting the swiftly evolving demands of IaaS/SaaS customers and playing an integral role in generative AI innovation, Oracle is focusing on building out the cloud ecosystem that fulfills the next generation of AI training development and inference demand.
Daniel Newman and his co-host of The Six Five Webcast, Patrick Moorhead of Moor Insights and Strategy discusses Oracle’s earnings in their latest episode. Check it out here and be sure to subscribe to The Six Five Webcast so you never miss an episode.
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 article. The author does not hold any equity positions with any company mentioned in this article.
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.
Other Insights from The Futurum Group:
Oracle Autonomous Database Goes Global Distribution
Oracle Autonomous Database Select AI Fuels AI-Infused Innovation
Oracle Generative AI: Advancing the Frontier of Enterprise Innovation
Author Information
Ron is an experienced, customer-focused research expert and analyst, with over 20 years of experience in the digital and IT transformation markets, working with businesses to drive consistent revenue and sales growth.
He is a recognized authority at tracking the evolution of and identifying the key disruptive trends within the service enablement ecosystem, including a wide range of topics across software and services, infrastructure, 5G communications, Internet of Things (IoT), Artificial Intelligence (AI), analytics, security, cloud computing, revenue management, and regulatory issues.
Prior to his work with The Futurum Group, Ron worked with GlobalData Technology creating syndicated and custom research across a wide variety of technical fields. His work with Current Analysis focused on the broadband and service provider infrastructure markets.
Ron holds a Master of Arts in Public Policy from University of Nevada — Las Vegas and a Bachelor of Arts in political science/government from William and Mary.
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
