The Six Five team discusses Oracle Q3 FY2024 Earnings.
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Transcript:
Patrick Moorhead: Oracle had earnings. Hey, did OCI blow out and were apps at 20% like the last four quarters?
Daniel Newman: Look, the company has a strong result. It had a beat. From a guide standpoint, it was where people wanted them to be, and more importantly, the company has continued on its trajectory of overall strength against the market. Why do I say that? Well, it wasn’t like one of these mega blow-out, triple digit, growth areas in Cloud that we’ve seen Oracle have. And Oracle, of course, chasing a little bit, not being the biggest, but being it’s arguably gone back trying to be the third fourth competitor I think on a size wise for its infrastructure, it is still sitting at fourth. But if you look at the total aggregation of the business in the Cloud, the company also had some really positive news about what it’s calling the largest AI data center in the world. It’s partnering up with NVIDIA. I think that alone gave the stock like a 47% bump. I’m joking, but it did get a pretty nice bump when it talked about the AI data centers that it’s building out in partnership with NVIDIA.
So where did the growth come from? Well, look, it’s overall Cloud growth 25%, nice mid double-digit strength and that Cloud revenue is over $5 billion in the quarter. So you’re talking about 20 billion of run rate on its Cloud businesses now. The infrastructure business, 49% growth. And by the way, people were like, “It’s not that good.” It’s like it’s better than… First of all, kudos to Oracle as a lot of companies have created more opaqueness in reporting. They actually still are reporting a very crisp infrastructure number with OCI, and that’s now about a 1.8 billion businesses quarter at a 49% growth. So strong growth rearing towards 10 billion of IAS revenue. Then we actually put all the other parts in, you got the SaaS business for Cloud apps, SaaS business for Fusion, SaaS business for NetSuite.
Those are also driving some real strength in the business. All double-digit growth, 14 to 21% depending on which business you’re looking at. And look, this is the future of the company. You got a company with really predictable, almost three quarters of its revenue is considered predictable recurring revenue. Its Cloud business is growing mid double-digits. It’s got the sticky product, Enterprises RUN. I always talk about this in SAP. People might sometimes talk about these older core ERP and core database solutions that companies have to run their businesses and say, “Oh, everything’s going to move off these businesses and into these new, born on Cloud.” It hasn’t happened.
It’s taking a long time. It’s very difficult to move and to migrate. It’s sticky. It’s high margin, high service rate, high attach rate. It’s good business. And so Pat, this was a good solid continuation of growth against what I still consider to be a pretty mixed economy. I don’t know if you saw this quietly, Pat, but February highest tech layoff rate since February of 2009.
Patrick Moorhead: Wow.
Daniel Newman: So while we’re all sitting here languishing in this concept that GDP is up and the market is strong and inflation is going away, we’re laying off people at the highest rate since right after the financial crisis of 2008. So it’s not all great, but the deflationary aspects of tech like Cloud, like Oracle, are doing well.
Patrick Moorhead: Good breakdown there.
Daniel Newman: Thanks.
Patrick Moorhead: When other SaaS providers are doing 10%, Oracle continues to do 20%. I think that needs to be pointed out there and it’s just so consistent. It’s like clockwork, right? We saw with Salesforce, their SaaS numbers went from two X and three X to 10 X. And I mean 10 X percent, not 10 X, like 10 X. And I think that’s big and I know that probably a fair comparison would be to SAP and we’re talking about ERP, but it’s still impressive they can keep that going during this economy. OCI and the IaaS number, again impressive. Three years ago they were nowhere and here we are with giant, one of their biggest customers is Microsoft. We always have to know that that’s the big case. Microsoft talked, didn’t directly use the word Oracle, but Microsoft is a huge customer of Oracle, and they’re leveraging Oracle’s bare metal infrastructure with GPUs to do a lot of their generative AI stuff on there.
I don’t think that takes away from that OCI number. I actually think it gives it more credence and credibility. There could be a question that if Microsoft amps up their CapEx, where would that put Microsoft as a customer for OCI in the future? So I think it was a good fielding.
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.
