The Six Five team discusses Oracle Q4FY24 earnings.
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Transcript:
Patrick Moorhead: Oracle, fourth quarter, fiscal ’24. Hey, the company had a miss-miss and the stock went up 13%. So, what the heck happened? Well, what the heck happened was a nearly $100 billion RPO, an open AI inference deal, it’s not training, that was clarified later, and a Google Cloud deal where Oracle Exadata machines are literally sitting inside of Google data centers and all Google services, like Vertex AI and Gemini, have access to all that data. By the way, free ingress and egress, a thing that enterprises just want.
So some broader thoughts here. OCI, and that’s their IAS, demonstrates again that it has a very competitive IAS. I have to wonder too, is this OpenAI capability being brought up for Apple deal or what? There are some that believe, based on the architecture that OCI has, that Oracle has the most secure cloud out there. And by the way that they’ve done the virtualization versus others, they have a very compelling case here. At a minimum, it shows that that super cluster is pretty badass.
Second observation, after 15 years of the public cloud being out there and everybody having alternative databases and pooping on Oracle, Oracle shows how it’s been innovative with its database strength, database, sorry about that.
Daniel Newman: It’s okay
Patrick Moorhead: Now with Google, but prior to that with Microsoft Azure, enterprises are asking for this and here we are. Enterprises want free multi-cloud interconnects and Oracle and Google are delivering that. Final question, what’s AWS’s move with Oracle? Maybe when hell freezes over. I don’t know. The two have thrown immense bombs back and forth and in the end, the customers will probably get what they want, which is to have an Oracle Exadata machine sitting inside of AWS and who knows? Maybe free ingress and egress. We’ll see.
Daniel Newman: Yeah. So, I am going to talk a bit about the earnings. I’m going to mention a little bit about this OpenAI partnership, which I thought was pretty interesting because the results weren’t super great from a standpoint of the expectations. I think they kind of missed across the board.
Patrick Moorhead: They did.
Daniel Newman: But the vision and the growth of its cloud continues to be where its strength as. Remember, this is a company with more than 70% predictable revenue, so it’s very easy to forecast the performance. Some of the big deals and the big wins, all the excitement and exuberance for the company tends to be in the cloud. So the numbers being looked at as how is its cloud growth going? 40 plus percent infrastructure growth. So you’re seeing, it is converting well on its core customers using Oracle cloud infrastructure.
It’s also investing big in AI clusters, it’s partnering with OpenAI, partnering with NVIDIA. It’s got kind of that right pedigree of the different partnerships that it’s doing. It’s extending data center with Microsoft. I mean they’re partnering really effectively. And Oracle is a company that people didn’t generally look at as a partner-friendly company, it’s actually doing this pretty well in terms of getting its tentacles into the broader markets. It’s very focused on sovereign cloud, it’s got cloud at customer. So bringing that sort of cloud experience on prem where it needed to be, really understanding that slow migration off of private or on-prem to public cloud and making that and enabling that for people that want to operate in a cloud-like environment, but still have the benefits and the cloud sovereignty that you need. So, all those things are really, really effective.
But the growth came in the infrastructure, which is really, really interesting because their infrastructure growth versus others’ is substantial. It’s also smaller. It’s significantly smaller more so. You got to acknowledge both of those things at the same time. The cloud deal with OpenAI was really interesting, of course. This was something that the market had sort of, I don’t know, I don’t know if you expected it, but what I’m saying is, the company misses, but at the same time it still sees a really substantial pop. What did that come from?
So Pat, this goes back to our Apple conversation. You and I didn’t love it. You and I are like, “Why do they need it?” The world freaking loves it. The world absolutely wants everybody to partner with OpenAI. So it seems like maybe the delta between the investor class, which is all looking for, how do we get exposure to OpenAI since it’s not public? To the tech purists that we are going, “Well, if you’re a privacy company, why are you doing this?” But basically Oracle is going to give more compute capacity to ChatGPT, or OpenAI. So basically now it’s Microsoft Azure AI, Oracle, and ChatGPT all working together and with basically Sam Altman being very candid to the market that he needs more compute power, where does he go to get it? And so to your point, the hell freezes over thing with AWS is that there’s probably… It’ll end up getting there because that’s just how the market works, but there’s a lot of baggage there.
Patrick Moorhead: Lot of baggage, man.
Daniel Newman: And so I don’t know if that’ll happen anytime soon, but the overall perception is that this is a really, really good thing. Now, another thing that is notable that’s kind of exciting and interesting, especially now that this whole proxy war or shareholder war is over with Tesla and Elon’s going to get his money, is that Oracle is providing a poop ton of infrastructure to X AI as well. And again, while everybody in the world doesn’t want to like Elon because his politics, I don’t rule that out from being something, Pat. I mean I’ve been watching your… You’ve been doing this kind of charting on the best gen AI tools as you’ve been searching, you’ve been using earnings in fact as your platform to look at this. Well, I think a few people, including myself said, “Hey, go check out Perplexity. Go check that out.” And I think it bumped Google off your top four right now temporarily?
Patrick Moorhead: Yeah.
Daniel Newman: Top three. Groq is pretty good. And I’m just saying, not Groq chips, which we do talk about, Groq AI. I actually find it to be pretty darn useful when I’m using it inside of Twitter. And that’s not X AI itself, but he’s using common capacity and competencies. What’s to say that X AI doesn’t become a really, really valid platform and that could be a huge growth engine for Oracle as well. So they’re making good partnerships, they’re in the right places, and they’re adding capacity in the right ways, and they’re making good investments. And I think that’s why the investors got excited, despite the fact that the actual results this quarter were not particularly great.
Patrick Moorhead: Yeah, it was actually good to see the market actually respond to something that’s not in your face and something that was in the future.
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.
