On this episode of The Six Five Webcast, hosts Patrick Moorhead and Daniel Newman discuss the tech news stories that made headlines this week. The handpicked topics for this week are:
- Oracle Q3 FY2024 Earnings
- Arm & Cadence Automotive Announcements
- Adobe Q1 FY2024 Earnings
- AI Innovation at SxSW 2024: Better Open or Closed?
- MongoDB Q4 FY2024 Earnings
- Plus Secures Major L4 Trucking Win
- Six Five Summit 2024
For a deeper dive into each topic, please click on the links above. Be sure to subscribe to The Six Five Webcast so you never miss an episode.
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Disclaimer: The Six Five Webcast is for information and entertainment purposes only. Over the course of this webcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we ask that you do not treat us as such.
Transcript:
Patrick Moorhead: We are back and live here for this week’s installment of The Six Five. Dan, it’s not a Saturday morning. It is a Friday morning. We’re both in Austin. It’s great to see you bestie. How are you?
Daniel Newman: Yeah, it’s funny, I haven’t heard us call it an installment before, but I like that. Welcome back to the next installment of The Six Five. Yeah, so let’s go with that, we are in installment number 208.
Patrick Moorhead: You like that?
Daniel Newman: I do, I do. I like when we changed things up. We’ve done a Seven Five. We’ve been doing Saturdays, Pat. Now you’re not even getting dressed anymore. I love what we’ve got going here.
Patrick Moorhead: Oh, I looked in there and I was on the big stage yesterday and I just decided, you know what looks good? is a T-shirt and a hat. It was raining. It was dark when I got to work and it was raining, and I had a huge trench coat on and decided that we didn’t need a trench coat for the show, but it’s great to see you buddy. I’m soaking all of this Austin juice in. It’s nice to be home.
Daniel Newman: What were you on the big stage for? Don’t be shy. I haven’t seen a victory lap. I’m dying.
Patrick Moorhead: No, no, I interviewed Michael Dell on the big stage. We had I guess it was 1,000 people in the room, I’d say we had about 950. But no, talked about Michael’s life and went all the way back to him being a kid and all the crappy jobs that he had that, by the way, you and I had when we were little kids. Talked about his philosophy of innovation, philosophy on culture, technology, AI. Catch it on the rebroadcast. It’s on YouTube and it’s on the South By South website, but no, Michael’s just an amazing guy. Geez, he’s worth over $100 billion dollars, and I’m really honored that he knows my name and that we get to spend time with each other on stage.
Daniel Newman: Yeah, I’ve told this story privately, but this community, you’re like our family. So when I moved to Austin, I got a lot of messages from people over time, but the first message I got, private message from anyone about my move, was Michael. Slides into my DMs on Twitter and sends me this long, “I’m so happy to hear you’re moving to Austin. Here’s all the things that are amazing about this city. Don’t be afraid to reach out.” He introduced his wife to my wife, if she had questions. Of course, I didn’t really ever take him up on it, but he was genuine. It was an amazing, genuine outreach and a warm welcome.
This city is Michael Dell in Austin. How much of this city as he helped to build and to create and flourish? Hospitals, college buildings, art and history and culture. Not to mention bringing tons of employment to the community. Pat, I was only mildly envious, but I can’t wait to watch back the replay. You guys looked great though. I saw you star-studded on the red carpet, and you were wearing clothes instead of looking all buff in a T-shirt.
Patrick Moorhead: No, I appreciate that. No, Dan, it was fun. So hey, we’ve got a good show for you. We’re talking more than Michael Dell in South by Southwest. We’re talking ARM, Cadence, Oracle, Adobe, OpenAI, not as in the company, but the notion of OpenAI that was discussed at South by Southwest. MongoDB earnings and Plus got a major design win that we want to talk about. Then maybe at the end we’re going to talk about The Six Five Summit, 2024.
Daniel Newman: I would like that, Pat. I would like very, very much to talk about Six Five Summit, 2024. That would be fun.
Patrick Moorhead: That’s good. So hey, let’s dive in. 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. Move to the next topic here. So ARM and Cadence both had interrelated automotive announcement. ARM as we’ve seen recently, public company again just crushing it. If you remember, I think it was last month, Daniel, that the stock price just freaking rocketed after their earnings. And a lot of that has to do with getting new sockets, gaining market share, but it also has to do a lot with the sophistication of the IP that they’re offering. And essentially what they did on the automotive side is they brought out three things. So new automotive enhanced processors with the v9 architecture and the second was is putting CSS, which is their ARM compute subsystems, which is a product where they deliver more validation, requires less work on the licensee and they’re able to charge a higher price.
The third thing they did, which reminds me a little bit of what Qualcomm is doing with AWS is they’re enabling software testing that’s Cloud-based, as opposed to waiting the two years it might take to crank out a chip or a chiplet to be able to test. So now you’ve got ARM really going, and I like their expression of this, bumper to bumper all the way from an auto MCU, which is a very low-end controller that sometimes competes with an FPGA to zonal controllers. And that’s essentially, hey, something like braking system, right? If you have a disaggregated design to computer vision where they add the ISP and you can even add a third-party NPU to the cockpit, L-II and full autonomy. So ARM making a huge move here, if you look at their growth over the last couple quarters at least the discussion was, “Sure there was growth even in declining market and smartphones because you had people going with bigger cores,” but you had data center and you have automotive.
So good progress from the company. By the way, it was really cool to see ARM’s highest performance server processors, right? The same IP that’s used let’s say at AWS for Neoverse, sorry, ARM Neoverse used in Graviton being put in here. And I think this puts ARM and Qualcomm even at more odds I feel the two companies colliding. There was a related announcement by Cadence that essentially… So ARM doesn’t do the chiplet, but Cadence has a software development platform and a reference design for ADAS. So if you are a tier one, if you are a chip maker and you’re looking to increase and enhance time to market, you can use Cadence’s platform to do this.
And the other cool thing some people might know is Cadence actually has its own NPU and it’s called Neo Neural Processing Unit or NPU and then has an SDK called NeuroWeave for machine learning. And they also bring DSPs to the table. So not only can you use their tools, but you can also use Cadence’s IP to accelerate your ARM-based design. Isn’t it crazy how the new power players in there are IP companies and companies that you don’t even have to be a chip company, you could be a Tesla and use their software to pull all this stuff together.
Daniel Newman: Well, I think that’s really what it’s all about. Look, there’s the new power brokers and by the way, there’s a desire for the power broker to just pivot, right? Nobody wants to be over dependent. The world has seen… Let’s just talk about ARM’s announcements around vehicles. Well, first of all, ARM, it’s all about moving up the stack. It’s all about being more value add, more white glove, offering more services and being able to raise its core value, literally core value across everything it does and make more per core, per license and be able to bring more companies in to use its IP to develop chips. Look, we’re seeing a world where manufacturing of silicon used to be for a very small number of players and now you’re seeing that broaden and be democratized and companies and industry vertical solutions are being built. Chips for robotics, chips for IOT, chips for vehicles, chips for PCs, chips for wearables, hairables, VR, AR. And it’s opened the door to lots of companies creating unique designs. And these unique designs enable differentiation.
Historically speaking, there was a very small subset of chip manufacturers you could work with, and unless you had a certain size and scale of business, you couldn’t even consider building something custom. Well, now we’re seeing obviously what ARM’s enabling from a custom, what Cadence, Synopsis enable from an IP standpoint. We’re hearing companies like Marvell and maybe NVIDIA that are entering custom to help actually design custom chips. You’ve seen over time gaming console makers partnering up with companies like AMD to design custom chips for custom gaming console technologies. And over time the point is what it’s done is it’s opened up the world.
So there was a period where there was a few companies that could basically develop ADAS technology, build the silicon and then develop the software. And there was an era of NVIDIA, NVIDIA and Tesla. Then Tesla went out and they figured out it could do it on its own, because it got enough scale and size. It could design its own silicon. And you don’t think companies like BMW and GM and Ford and Stellantis are all looking at this right now. Right now a lot of them are partnering. Of course, we haven’t seen a design pipeline bigger than Qualcomm’s, but they’re looking at it. They’re looking and considering what gives them the ultimate amount of flexibility. This is why the digital chassis flexible building blocks is so important and ARM is saying, “Look, we’re going to offer something too. We’re going to enable this. We’re going to empower this.” This is what the future looks like and ARM is moving in that direction.
Having said that, ARM’s also getting more expensive. People are noting it. I think I saw something yesterday about SiFive having a super large bump in its licensing business this year. Why is that? Well, as ARM gained strength and has grown market and has more business and has driven more revenue and increased licensing value, there are more people looking for lower cost open-source options and you’re seeing it opened up the floodgates for RISC-V. This is an exciting world, Pat. This is an exciting demand-driven world where companies that really historically had nothing to do with chip making and chip design can find themselves in the chip making, chip design business because of what IP providers, licensing providers, fabs, foundries have basically opened up to the world. And, of course, with silicon eat in the world, Pat, this is pretty cool.
Patrick Moorhead: Yeah, some of the chip makers that were in the press release were Marvell, MediaTek, NVIDIA, NXP or an ACES, Telechips and TI. Note that Qualcomm is not in there. So essentially ARM is being the arms dealer to these companies related to the automotive space. Competition is good. I’m just amazed, Daniel, that the business model and the math works out for non chip makers, right? That’s got to be a little disturbing and we’ve never actually seen anybody talk about… So for instance, AWS doesn’t say, “Here’s how much money I put in and then here’s what I got out.” Either cost savings, time to market, something like that. But given that somebody like AWS has been doing it for so long, I sure can’t imagine that they would do something that lost money for 10 years.
Daniel Newman: Yeah. Well, I think this is going to be a really hot space to watch, Pat. I think it’s just getting very, very exciting and like I said, every new architecture, every new licensee and licensor of technology, it just goes to show, Pat, that while the world was thinking software would eat it, you and I knew what would really eat it. And I haven’t done a victory lap on that in almost a week. So let’s call it one more time right now just, hey, you know something about silicon.
Patrick Moorhead: I do, I do. Some people might say I don’t know something about silicon, but I don’t know, I just, for a company for 11 years that did Silicon, ran product management, product marketing, corporate strategy, go to market. What do I know, Dan? And before that I worked 10 years for a company where I specified which processors would go into my platform. I don’t know. What do I want? I was a customer, competitor, now I’m a pundit. I don’t know. What do I know? Let’s move to the next. By the way, sarcasm is what I learned in the Midwest. It’s what we do. It’s our humor to get over the sadness.
Daniel Newman: It’s my love language, Pat. Sarcasm is my love language.
Patrick Moorhead: Get over the sadness of there being no jobs. So let’s move to the next one, Adobe Q1. Could they take advantage of the AI BoomTown, Dan?
Daniel Newman: Yes and no. So Adobe had a top bottom, but again, when you make a top bottom but you don’t guide with a lot of confidence, the market tends to be incredibly punitive, which in this case it was, taking almost a 10% battering after it announced this quarter. The company’s performing well. It’s climbing some strength in its AI portfolio, which I expected. Didn’t necessarily come out and directly attribute a lot of how AI is exactly affecting revenue, which is something I’m eager and interested to hear more about. We’ll be at the summit I think end of March and we’ll be hearing more about it there. Company created strong cashflow, Pat. It saw growth in double-digit growth in its media, in its digital experience segments. So you had strength in some of its core and growth business areas, actually in the creative as well. A double-digit in all of them, but just low, like 10, 11, 12%.
So these businesses are growing and remember this is a company that’s like almost all of its revenue is subscription. So you got to love that about the company. Almost everything is recurring. It makes it very, very healthy. On the document side was actually its fastest growth, 18%. So that was strong. That was encouraging. It did announce a really significant buyback, $25 billion buyback. So I always say that’s a vote of confidence that the stock company believes the stock is under priced. And so while it created this huge sell, it also had this huge buyback where it could immediately initiate that, probably give the stocks some stability and strength. But again, we’re not stock or equities analysts, we’re just looking at this as the ground truth. Pat, the areas that I was super focused on for the company was how much is AI influencing its business?
From Shotnew’s commentary, it sounds like it’s strong, but I would love to hear more specifically from how much dollar-wise, how much net revenue expansion, how much stickiness, how many new customers are coming over and what the AI impact is. We did see there has been some scuttlebutt in the marketplace that Adobe’s Firefly and Image Generator is having some of the same issues that Gemini had as it relates to historical accuracy and imagery. And this is really sensitive, because I’ve been very impressed with Adobe’s approach to ethics and licensing IP, not scraping and abusing content but using real licensed content and such. But there is a lot of uncertainty right now with how these models are developed, how they are governed, how they’re insured for historical accuracy. And this is going to be a sensitivity for some time as we try to get to a balance of generative AI that is conscious of societal issues and norms and at the same time is demonstrating that it’s accurate in its depictions of things like history.
So we’re going to have to watch that a little bit. Not a direct impact of earnings, but something that I think a lot of people are paying attention to right now after Google had its recent woes with Gemini. But Pat, look, this is a healthy business, strong robust growth, multi-diversifications into different spaces including creative, including data and experience CDP, as well as media space, Pat, but solid but conservative on the guide. And again, it goes back to what I talked about. The market strength maybe is a little overdone in terms of how it’s being presented, but we’re an election year, so who knows what we’re hearing anymore and how accurate any of it is. We got to move people to vote, to the polls, right? So stories will be stories, and you and I are here to hopefully uncover what the heck is really going on. That’s what we do as analysts.
Patrick Moorhead: So I’m going to take a slightly different tack. So first off, there is going to be an analyst meeting at Adobe Summit in two weeks, which I think is really where I’m hoping we will get a lot of the answers to the growth questions. Without even looking at their numbers, I think the biggest impact, without even knowing exactly what their AI numbers are, I think this has a lot to do with, I think they’re going to have amazing growth, but they have so many users in the hundreds of millions. To flip all of them to the next new thing takes time. If I look at their big opportunity, if I’m a company and anybody with money who can be sued for copyright infringement, and I would even put… My gosh, I remember using an image that I mistakenly used. I thought it had an open license and then I used it on a blog, and they came after me and they were going to sue me unless I paid them $8,000 for a license.
I don’t know if it was Getty or somebody like that. Total mistake. It was an editor who had put that in there. So imagine we’re in this world where your Dolly 3, your MidJourney, OpenAI, your Sora, right? We have no idea where you’re getting your content from and what your basis was for learning. If you’re a company with enough money where it would hurt if you get sued, I am thinking that you are going to go with Adobe who has a very tight lid on exactly the content and the licensing that it’s using to train potentially to ground their models, their creative models. So the future I see as 100% bright. If you’re a business, who are you going to give your money to? Somebody that gets the job done, that won’t get you sued or one that there’s a question on who and when somebody might be able to come after you. What do you think, Dan? What do you think about that thesis?
Daniel Newman: I think this is going to be one of the issues of the next… I don’t know. Did you see the CTO of OpenAI yesterday? There’s that video that went around with her asked on what their training, the model, the Sora on and, God, what a disaster. I don’t know. Look, there’s so much here. But I said that about Adobe. I’ve been very pleased with their transparency, obviously, and how they’re handling it. It’s not perfect, but as we create more and more generated content, Pat, you sure want to make sure that the content you’re generating isn’t going to get you sued. So it’s going to be a big topic for some time.
Patrick Moorhead: It is. And just wait until the AI gets smart enough to go in and learn what it’s been trained on. And literally, the AI is so smart, it will come and sue you and it’ll show up in your email box.
Daniel Newman: AI lawyer. It’ll be like with a demolition man or whichever one where if you speed, the ticket just comes right out the dash. If you start speeding, it’s releasing.
Patrick Moorhead: Exactly. Yeah. Let’s move to something related. And it was a take-off of what we discussed last week. We talked about OpenAI, about is it open or closed and which is better? And I think profit versus nonprofit, this is a little bit of a derivation of that, but a lot of the conversations at South by Southwest this week were exactly as you might expect, is AI innovation better closed or open? And I participated in a speaking event and I also attended a related panel that was led off by IBM, Meta, CEO of Partnership on AI and the co-founder and executive chairman of Anyscale. And by the way, he’s a CTO of Databricks as well. And I really appreciated how… You know I’m not an intellectual. I’m just going to throw it out there. You’re probably not surprised, but I do like a good debate, right?
Because there’s a lot of people that might say, “Closed is actually good.” It’s better security. It’s better safety, less prompts, manipulation. And gosh, shouldn’t the companies that spent a $100 million dollars to train an LLM, shouldn’t they be paid back for all their investments? So I like it. On stage they actually red-teamed it. And one other thing I liked was the provocative and Dario just got a huge shit-eating grin on his face. The biggest smile, “Hey, can you really scale AI outside of the largest tech companies?” And he just got a huge smile on his face and just talked about how you can disaggregate innovation. People are actually smart enough outside of the largest 10 companies to be able to do this. A good analogy was Linux, right? Related to the safety and security and can you scale, which is, I don’t know if you remember this, Dan, but probably in the ’90s when Unix went to Linux, there was this debate on, is Linux safe?
And Microsoft was the biggest company that said it’s not safe. Only Windows is safe and very managed Unix distributions. And here we are today, the lingua franca of Edge capability and also data center is Linux, and there’s so many people banging on Linux that again, nothing is impenetrable, but it is very much a secure operating system. And look at the companies who can innovate off of it is pretty big. And what I liked about the panel is that this wasn’t a big commercial for the AI Alliance that spearheaded by IBM and Meta with 200 members. It was more of an intellectual conversation. I had the chance to interview Dario and Ion Stoica from AnyScale and Databricks and really had a good conversation diving in and asked them some really tough questions about, “Hey, this is great. I saw the press release, but what have you guys done lately?” So as soon as we’ve published this video in a few days, I urge you to go in and check it out.
Daniel Newman: Oh, yeah. This is a big topic, Pat, and I know you did it through the lens of quote/unquote open and closed versus open and closed, but this is a permutation of the Sam Altman and Elon Musk debate that’s going on. And the debate really is, one, is who owns this? Two, is the commercialization of it. Three is the safety of it. Four is should any one company be given a stark advantage through ownership and licensing of a platform? And then five, and they talked about this a lot on one of the pods you and I liked, the All-In pod, is about what is the legality of building an architecture like this? So I like what you covered. I wasn’t at the session, so I can’t speak to the content at the session itself, Pat, but what I can say is that I personally think what’s going on right now is we need more open than closed.
And not to say that there isn’t a business in closed, but the problem is right now is we’re running into all these issues with LLMs and lack of transparency is gating us from understanding where we’re going wrong. And this is a snowball. How quickly does it snowball out of effect? Whether it’s like we talked about historical accuracy. We talk about what information is fed. We’re living in a world now where… I forget what school it is. It was one of the Ivy’s or Duke or one of the schools that basically said they’re getting rid of essays now, college entrance essays, because kids are writing them with generative AI. And no longer can the admissions counselors actually tell what’s real, what’s not, what’s how to discern. And by the way, this I realize I’m a tangential of everything you talked about, but this is really important.
The world is effectively changing and we already have entered a world with social media where people are basically ingesting data that is not always fact-based, but we are interpreting it as fact. Now you have a system that is already interpreting data based on a set of algorithms, is spinning out an output that is rooted in bias, because the algorithms all have bias. It’s not a, we won’t say which way or what it is, we don’t know, because if it lacks transparency. So an open ecosystem at least forces a higher level of transparency. And this goes back to why Musk is having a fight after spending a $100 million into OpenAI. With Sam is that he, at least with Groc, he’s publishing everything. He’s open sourcing and plans to publish everything that’s in the algorithm. You’ve seen it with Twitter by the way. He’s done it with X. He’s published the algorithm. Everybody, you have to have some technical chops to know what you’re looking at. But if you actually have technical chops, you can understand how it works.
The bottom line is opaqueness is going to be problematic, especially when it comes to building these models and when it comes to the outputs of these models. And you have to assume that if we’re going to get the productivity gains out of all of this technology, it means we are going to be limited in how much we will scrutinize the outputs of these AI systems. Meaning you don’t get 10 X or 100 X productivity on emails outbound through your sales without basically assuming that the outputs are correct. We now have people building content, sending it out to our customers based upon an algorithm and very little fact checking and accuracy checking, because that’s the only way you get the productivity. Otherwise, you’re just QAing all day long, which again, won’t get you there. So I didn’t see your session, but this is a huge topic. I love it. I’d love to talk more about it. I realized I derailed a little bit of your specific panel, but Pat-
Patrick Moorhead: Oh, Dan, this wasn’t about showing the panel. This was about-
Daniel Newman: I didn’t see you shielded it. I just meant I couldn’t speak to it.
Patrick Moorhead: Yeah. It wasn’t there. Yeah, you didn’t see it, not asking to do that, but it was more on the topic which you did. So thank you.
Daniel Newman: Cool. Well, you got to fight about something, dude.
Patrick Moorhead: No, I know you’re my work husband.
Daniel Newman: Well, we’re very close.
Patrick Moorhead: Hey, let’s get into the next earnings here. MongoDB is-
Daniel Newman: I love talking about earnings. Thanks.
Patrick Moorhead: I know, I know you’re the best. That’s why I gave you all of them, because you’re the best at it, my bestie.
Daniel Newman: I’m the earnings guy, Dan, Dan, the earnings man. Listen, it was an absolute banger of a quarter. This is another case of strong current, not so good future. So listen to this. Revenue beat EBIT, which is something they’re still focused on because they’re really haven’t been net income positive. There’ve been adjusted EBIT positive for a long time over at Mongo. They beat it by 86% and beat the guide by 89%. So huge EBIT beat and they beat on EPS, 48 cents versus the 41 cent guide. But the guides not great. You hear that.
Patrick Moorhead: It sounds like my son.
Daniel Newman: Yeah. Well, millennial.
Patrick Moorhead: You hear my son, man.
Daniel Newman: Millennial.
Patrick Moorhead: I love you both.
Daniel Newman: Well, Pico and I are a certain age. Aren’t Pico and I are closer in age than you and me?
Patrick Moorhead: Yes.
Daniel Newman: Okay. I don’t think that’s actually true. But anyway. But I-
Patrick Moorhead: That’s fun to say.
Daniel Newman: On a revenue basis, they guided missed by about 6% and they missed on an EBIT basis big. They missed on an EBIT basis by 34%. So a really, really big miss on EBIT, which never ever makes on the annual guide, never makes anyone super-duper happy. This is not indicative that the company’s doing anything particularly wrong. Again, there seems to be a bit of conservativeness coming from CEOs about what lies ahead. But there were some other good numbers in here, Pat, that are probably worth pointing out. You’ve got revenue growth at 27%. You’ve got full fiscal revenue up at 31%. You had 47,800 customers as at the end of January. So they huge customer base. And 34% on the Atlas Cloud, which has been a big focus, is how much other business is moving to the Cloud business. And now it’s 68% of their revenue in Q4. So these are areas of strength.
The company is generating cash. It still lost on a net basis for the year, which a lot of people, it’s so confusing. Adjusted numbers can be so hard to wade through. But overall, Pat, I think the company’s in good shape. It sets up well. Operational database is very important in the era of AI vector. It’s doing a lot of the right things and it’s made the pivot to this recurring Cloud-based offering. And so I’m optimistic about it. But what we saw here, Pat, across the board is a conservativeness in the guide, which I don’t know why no one’s talking about this, but this economy is complicated. It is complicated and it is not as robust as some people think. The jobs reports are all BS, huge adjustments every quarter. We are hearing about interest rate cuts. It doesn’t look like we’re going to get them. And I’m not trying to over-macro, but the overall macro is what drives these guides. These guides are conservative, because these CEOs are not feeling as optimistic about the long-term unless you’re selling GPUs. There’s a lot of complexity in every other part of the business ecosystem.
Patrick Moorhead: Yeah. I like to look at times like this when a stock gets hammered as, do they have the right roadmap and are they working to deliver optimal value? And I think the answer is yes. First of all, if you’re looking for a database to do your new generative AI stuff, or by the way, your non-generative AI stuff in an operational database, does it scale to multi-Cloud? And the answer is yes. Is there the ability to have a generative AI platform, vectorizing, vector database and vector search? Checkbox on that. One thing I do know across Enterprise, Daniel, is what’s styming a lot of them is how do I manage my data? And I do think that this opens up the bidding process which says, Hey, should I export my data or send it to the Cloud and use an end-to-end bedrock or a Google Cloud platform like Vertex to do end-to-end AI management, which includes a data platform?
I am hearing an incredible amount of conversation about Mongo in these. Oh, my gosh. Even my son who’s still in college, he’s talking about Mongo. They’re teaching him how to do this. And a employer that he did work for the summer, a very large Fortune 500 tech company uses Mongo, because it was more secure than Honeycomb and also the vector capabilities were better. So there’s also digestion, which is, you buy all this stuff and it takes time for these customers to go out and do something with it. What I’ll be interested to dig underneath is, do they have enough CX people in the field that are helping their customers? Because the sales motion of MongoDB is like department by department, and they measure a lot of this by workloads, how many workloads do I have? And those aren’t just all sitting in IT. A lot of those are sitting in different departments.
And do they have the capability to sell into as many of those as they need? And then once the sale is made, do they have the CX and the onboarding team to make sure that they get in and start generating revenue? Good conversation. Data is where it’s at. For generative AI, I would find it hard to believe that this company doesn’t have a shiny future, even though their stock got pounded.
Daniel Newman: Indeed.
Patrick Moorhead: Hey, let’s go into a completely different topic, but guess what? It absolutely involves AI. So here’s the backdrop. So Plus is a software provider for vehicles and trucks for ADAS and an L4. Okay? And we’ve had them on The Six Five Summit. Both of us have written articles about them, but they just announced a major deal with one of Europe’s largest trucking, I’ll call it conglomerates, called Traton. And key messages are this, right? The top five OEMs truck OEMs have declared partnerships with Plus, and that’s I think pretty important. And these are folks like Amazon, DSV, Bosch, the tier one, tier two, Luminar, a company that we’re familiar with, Nikola, Aveco. These are the ones that are just public. But I think what this does to me is it gives Plus… It gives me an element of permanence, okay? Because not only are they shipping L1 and L2 solutions into Aveco, Nikola, Bosch, Luminar, Amazon, and DSV, unlike their competition, Aurora, Torque, Kodiak and Wabi who they skipped over L1 and L2 went directly to L4.
Now we haven’t necessarily seen a lot of action. We’ve seen a little bit of action from Aurora with Amazon with the L4, but I’m interested to see in the future what Plus can do here. Ironically, Dan, we covered the disaggregation play that Plus did, where they disaggregated the different elements of their platform. So for instance, Intel could use them for a certain piece, but this solution that I’m talking about with Traton actually is an integrated solution that comes in, which to me was ironic. I was expecting this announcement to be about disaggregation, but it was about an aggregated solution. Anyways, that’s what I got here.
Daniel Newman: That’s it?
Patrick Moorhead: That’s it, baby.
Daniel Newman: All right, so I just had a couple. I had the chance to talk to their chief operating officer, Shawn Kerrigan. Definitely a great week for the company being able to announce effectively that the two of the major five autonomy platform trucking companies are going to go with Plus. Aveco, here. And then, of course, they were able to land Traton, which probably Navistar is the brand that more people would’ve known historically. It is a big moment and we’re looking by the end of the decade, we’re going to see a lot of autonomous trucks. I come from a family that’s in the trucking space. It’s funny. My dad didn’t believe it would be in his lifetime. Dad, it’s going to happen in your lifetime. It’s happening in your lifetime. So this is moving very quickly.
Effectively, we’ve got three different solutions. You’ve got totally turnkey, which is what the Daimler approach is, and then you’ve got the approach that’s hardware, software, aggregation plus OEM. And then what you really have with Plus is pure software. So it’s purely focused on software. The hardware and the truck building is left up to the partner. So that’s how the three companies split and create the value add. So they’re building block focused and their building block is software. That’s where they truly believe they’re able to differentiate.
You look at the TAM, you’re talking about a market that’s got a trillion plus dollars of TAM in the self-driving trucking space. It’s big. It’s a big opportunity. Of course, that’s all in, that’s hardware, software and truck, not just the software itself. So Plus obviously can’t capitalize on all of that, but it is meaningful. And again, this is directionally really good for the company, which is going to likely need to raise more money at some point. It’s either going to make another big raise, maybe it’ll go IPO if enough scale. But having these right partners, having these right OEMs, having… By the way West and an East Wind with Traton being a West Wind for U.S., Europe and then, of course, Aveco in China. They really have an opportunity to get meaningful saturation into all these different markets. And that’s important.
And then it’s strength in validation that they are best of breed software now with two of five. One’s doing it all. So of all those that are going to be outsourcing the software with Aurora and others, 50% of them have picked Plus. So strong, good win. Good moment for the company, Pat. And we’ve ridden in one of these. We didn’t run the L4 ones yet, but we’ve been in an autonomous truck with an experienced one of these with an L2 Plus driver. Participation is pretty cool and it’s going to continue to change the world.
Patrick Moorhead: Like what the company’s done. They have separated this out themselves from all China activities that have Aveco is actually in Europe and I think it’s smart. Now they’re the software arms dealer to the west for trucking. And by the way, cars, we haven’t seen a car announcement yet, but I’m expecting that in short order. I’d like to see the company partnering with all the platform providers out there. Interestingly enough, the ones that I listed for ARM, and I know they already have a partnership with NVIDIA on the platform side, but I’d like to see announcements, platform announcements very similar to the one, Daniel, we saw with VMware with private AI. It’s like VMware, private AI for NVIDIA. I’d love to see the Plus capability for Qualcomm, for Intel, for AMD. A company like AMD needs a company like Plus like crazy.
AMD is… They’re in Tesla through Xilinx. They’re in some key safety systems, but AMD is a company that needs what Plus does. And then Intel who has cast off Mobileye and came up with three new SoCs for the car also needs companies like Plus to do that. I’d like to see some integrations in there as well. And not only on the processing platform, because life is more than that, but also on the actuator side and the sensor side is where you need that. So Dan, let’s wrap up this episode. Talking being self-serving here, but we have The Six Five Summit, 2024. This is our fifth year, Dan. So bring it on, baby. Why is it exciting? What’s new? What are we doing?
Daniel Newman: Are going to talk about something no one is talking about this year at our summit. And that is artificial intelligence.
Patrick Moorhead: Oh, my gosh. You’ve got to be kidding me. So neat.
Daniel Newman: We’re going to mix it up. We’re going to do something different. We’re going to go in and the theme of this year’s event is AI Unleashed and, Pat, I could not be more excited. I don’t think we could be more excited, more proud, more pleased that our fifth installment, our fifth inaugural Six Five Summit will be kicked off this year with a conversation with ServiceNow Chairman and CEO Bill McDermott. We’re going to catch it. We’re going to have a chance to sit down with him at Knowledge this year at the ServiceNow event. And Pat, we’re going to be digging into new Enterprise software architectures and what the future of software will look like in an AI-infused world. So that’s going to be really exciting.
And of course, he joins a multi-year star-studded lineup that has included some of the biggest CEOs on the planet from Jensen Huang, who has joined in the past, Pat, to CEOs and heads of some of the biggest companies on the planet. Hock Tan, Arvind Krishna. You go down the list, Pat Gelsinger, Lisa Su, Michael Dell. We’ve had so many great prolific CEOs over the years, and I couldn’t be more excited, more proud to have Bill kicking off this year. And we got a great slate that will come to follow. We’re filling that in as we speak.
Patrick Moorhead: Yeah, it’s fun. Some of the changes in addition to AI is sprinkled everywhere, is we’ve added observability to the data platform. And we have a section called Enterprise AI platforms. And these are holistic platforms and architectures that include data management, the training, the tuning of those, governance and deployment to end users. I’m really, really excited about that. The other thing we’ve done is we’ve opened it up, Enterprise apps. We’re sure I think maybe we had ERP and CRM before, but we got every M out there, SCM, PLM, EPM, HRM, Martech, HCM, Field Service Management, CRM, CCAS, CX. We’ve got everything. Super excited about that.
Here’s the other thing is all of the Moor Insights & Strategy and Futurum Group analysts will also be hosts. So regardless of what you want to talk about, you want to talk about thought leadership, you want all the way from thought leadership down to the nitty-gritty of an architecture or an operator. We have the specialist in that that you can marry up with, essentially your best speaker at your company. So that’s all I want to say. I don’t want to shill anymore, but if you want more information, you can hit up thesixfivesummit.com. Dan, I am super excited about that.
Daniel Newman: It’s going to be amazing. I couldn’t be more thrilled, more excited, more pleased. It’s going to be a mega moment. And of course, with all that’s going on, Pat, in AI, just getting the biggest, brightest minds in tech to join us, once again, is going to be another marquee moment. So thanks everyone in advance for registering, signing up, distributing, sharing. This is going to be great. I’m stoked.
Patrick Moorhead: It is 87 days, 23 hours, 55 minutes and six seconds. Are you ready?
Daniel Newman: Let’s go.
Patrick Moorhead: I’m ready, baby.
Daniel Newman: Let’s go.
Patrick Moorhead: Hey, I want to thank everybody for tuning in this week. Dan, pay attention till we go out. Love you bestie. I know.
Daniel Newman: I’m paying attention. I never don’t pay attention to you except when I’m not paying attention.
Patrick Moorhead: I know. I’m just jealous that I can’t pay attention to multiple things at the same time like you.
Daniel Newman: Well, we don’t know that I do that.
Patrick Moorhead: All right. Anyways, folks, thanks for tuning in. We love you. Tell your friends, family, pets, whoever has access to video or audio. And if you have complaints, you know where to find Dan. If you have accolades and victory laps, send those to me. Appreciate, love you. See you next Saturday.
Daniel Newman: Friday.
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.
