The News: Oracle Corporation announced fiscal year (FY) 2024 first quarter (Q1) results. Total quarterly revenue was up 9% YoY in USD and up 8% in constant currency to $12.5 billion. Cloud services and license support revenue was up 13% in USD and up 12% in constant currency to $9.5 billion. Cloud license and on-premises license revenue was down 10% in USD and down 11% in constant currency to $0.08 billion. Read the full press release from Oracle on the company’s website.
Oracle FY 2024 Q1: Solid Results Bolstered by IaaS Gains
Analyst Take: Oracle delivered solid FY 2024 Q1 earnings highlighted by Oracle Cloud Infrastructure growth of 66% YoY, notably faster than the company’s hyperscale cloud infrastructure rivals. Oracle CEO Safra Catz emphasized that Oracle’s total cloud services revenue, Infrastructure plus Applications, grew 30% to $4.6 billion in the quarter.
As a result, Oracle Cloud Services plus License Support revenue now accounts for 77% of Oracle’s total revenue. From our view, this position represents a highly stable, consistently profitable revenue stream that, combined with Oracle’s ongoing expense restraint, enabled the company to produce 16% growth in non- GAAP earnings per share (EPS), 21% growth in free cash flow (FCF), and $7.0 billion in operating cash flow (OCF) during Q1.
According to Oracle Chairman and CTO Larry Ellison, Oracle’s Q1 performance is further bolstered by generative AI development companies that have already signed contracts to purchase more than $4 billion of capacity in Oracle’s Gen2 Cloud, more than doubling the company’s bookings at the end of Q4. He stressed that AI firms of all sizes are signing up for Oracle’s remote direct memory access (RDMA) interconnected NVIDIA Superclusters solution due to its ability to train AI models at twice the speed and less than half the cost of other clouds.
Key FY 2024 Q1 cloud-related results included:
- Q1 Cloud Revenue (infrastructure as a service [IaaS] plus software as a service [SaaS]): $4.6 billion, up 30% YoY in USD, up 29% in constant currency
- Q1 Cloud Infrastructure (IaaS) Revenue: $1.5 billion, up 66% YoY in USD, up 64% in constant currency
- Q1 Cloud Application (SaaS) Revenue: $3.1 billion, up 17% YoY in USD, up 17% in constant currency
- Q1 Fusion Cloud ERP (SaaS) Revenue: $0.8 billion, up 21% YoY in USD, up 20% in constant currency
- Q1 NetSuite Cloud ERP (SaaS) Revenue: $0.7 billion, up 21% YoY in USD, up 21% in constant currency
From our perspective, the 66% YoY IaaS growth indicates Oracle is gaining share in the global cloud market at a positive rate with the IaaS revenue an additional good sign for sustaining Oracle’s cloud ecosystem momentum. Plus, Oracle’s SaaS/Cloud Application 17% YoY growth is solid, especially as measured against slower growth in the overall SaaS market.
While Oracle made notable strides across its IaaS and key SaaS categories, we note that the general market sentiment proved unenthusiastic due primarily to Oracle’s light guidance following the company’s huge run during the course of this year. Plus, Oracle fell short on hardware and license Q1 revenue, which we view as also contributing to the follow-on dip in share price. Longer term, we see these shortfalls as a temporary speed bump rather than a more endemic challenge for the business, which bodes well for an improvement in market sentiment.
In our assessment, Oracle is primed to drive generative AI innovations that can further broaden 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 include Oracle’s Q1 GAAP operating income at $3.3 billion. Non-GAAP operating income was $5.1 billion, up 13% in USD and up 12% in constant currency. The GAAP operating margin was 26%, and the non-GAAP operating margin was 41%. GAAP net income was $2.4 billion. Non-GAAP net income was $3.4 billion, up 19% in USD and up 17% in constant currency. Q1 GAAP earnings per share were $0.86. Short-term-deferred revenue was $11.1 billion, and Q1 operating cash flow as noted was $7.0 billion, up 9%.
Oracle FY 2024 Q1 Results: Why Oracle’s Cloud Business Is Prosperous
From our perspective, Oracle is sustaining its organization-wide cloud momentum through continuous portfolio-wide innovation. For example, Oracle Compute Cloud@Customer, announced in August 2023, ensures that customers can run the same Oracle Cloud Infrastructure (OCI) services anywhere and in full accord with managing their distributed cloud environments from a single control plane—a massive boost to uplifting the overall cloud experience. Plus, customers can dynamically scale up their workloads to meet peak requirements while having full assurance of the ability to scale down to decrease costs. Fulfillment of the data residency, security, and latency requirements of all customers based on their unique demands is equally essential.
Moreover, we find that the introduction of Compute Cloud@Customer creates a new dynamic and a compelling value proposition for Exadata Cloud@Customer users. Although they both use the same basic CPUs, chassis, and OCI control plane, they are optimized for different functions: Exadata is optimized for Oracle cloud databases, and Compute Cloud@Customer is optimized for applications and middleware. In fact, they are complementary offerings with strengths customers can leverage in cloud on-premises with their elastic and independent scalability of compute and storage, and, of course, “pay for what you use” cloud consumption models.
Compute Cloud@Customer builds on the Exadata X10M debut in July 2023 that we believe redefines what a cloud database platform should fully deliver. Trying to run Oracle Database on any other platform than Exadata X10M is basically equivalent to running the software in degraded mode on unoptimized, subpar infrastructure—which can produce inferior business results. Also, organizations can run Autonomous Database on Exadata Cloud@Customer X10M, which brings levels of machine learning (ML) and AI-powered automation and innovation that are not available from other cloud database providers in our estimation. As such, Exadata X10M represents a material leap forward for Oracle and for Oracle Database customers.
Additionally, we find the MySQL HeatWave has consistently delivered industry-leading performance. The latest release of MySQL HeatWave Lakehouse in July 2023, which delivers record performance for loading data from object store, is impressive. Databases either load data fast and defer some of the transformations to later or do transformations at load time and are efficient at query time. For HeatWave Lakehouse to deliver record performance for both loading and querying data is a breakthrough innovation across the cloud data warehouse market.
Notably, with the June 2023 EU Sovereign Cloud launch advancing its distributed cloud strategy, we ascertain that Oracle is the only hyperscaler to offer every single one of its hundreds of cloud services in the deployment model and location that a customer selects. Whereas other hyperscalers essentially assert “you must come to my public cloud for the best services,” Oracle brings its best services directly to customers as proven through the Oracle EU Sovereign Cloud debut.
Key Takeaways: Oracle FY 2024 Q1 Results Verify Cloud and AI Acumen
Overall, we regard Oracle’s FY 2024 Q1 results as moving the needle in the 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. In meeting the swiftly evolving demands of IaaS/SaaS customers and driving ecosystem-wide generative AI training, Oracle is focusing on building out a cloud ecosystem that delivers the next generation of AI training development and innovation.
Daniel Newman and his co-host of The Six Five Webcast, Patrick Moorhead of Moor Insights and Strategy discussed Oracle’s latest 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 Compute Cloud@Customer: Taking Cloud Services to New Heights
Oracle Compute Cloud@Customer: Disrupting the Hybrid Cloud Landscape
Oracle MySQL HeatWave Lakehouse: Delivering a New Competitive Level Set for Cloud Data Warehouse
Author Information
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.
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.
