Continuing to generate extraordinary customer demand for its AI and cloud infrastructure services, Oracle has built a $638-billion pipeline for future business that spiked 363% in Q4 and is now the world’s largest, surpassing Microsoft’s most-recent RPO total of $627 billion.
That RPO number is highly significant for several reasons:
- Winning the future. It shows that while Microsoft’s cloud revenue of $54.5 billion is currently 5.5X larger than Oracle’s corresponding $9.9 billion, Oracle is winning as much future AI and cloud business as its much-larger rival.
- Powerful momentum. That contrast is striking: if Microsoft’s cloud revenue is now 5.5X larger than Oracle’s, what has enabled Oracle to be positioned to not only narrow that gap but also reach full parity with Microsoft regarding future AI and cloud revenue?
- Oracle RPO growing *much* faster. While the absolute difference between Oracle’s latest RPO of $638 billion and Microsoft’s of $627 billion is slight, the Oracle advantage reveals itself starkly when we look at RPO growth rates: as noted, Oracle’s was 363% while Microsoft’s was 99%. In addition, Microsoft included this comment in its latest RPO disclosure: “Commercial remaining performance obligation (RPO) grew 26%, in line with historical seasonality, when excluding OpenAI. RPO of $627 billion increased 99%, with a weighted average duration of 2.5 years, when including OpenAI.”
- “AI changes everything.” That perspective from Oracle chairman Larry Ellison is now the company’s tagline. So, what market forces have come into play to convince so many customers to steer so much future business to Oracle rather than much-larger competitors Microsoft, AWS, and Google Cloud?
- The case against AWS. Oracle’s remarkable RPO performance means that its RPO/backlog is now 75% bigger than AWS’s: $638 billion versus $364 billion. Again, the 4.2X contrast between current revenue size — $37.6 billion last quarter for AWS versus $9.9 billion — and Oracle’s overwhelming outperformance in future contracted business that the RPO/backlog numbers represent clearly reveals that Oracle has unquestionably eclipsed AWS’s past leadership.
- RPO growth rates. In addition, we need to look closely at not only the RPO/backlog dollar volumes but also their growth rates. And once again, Oracle blows AWS away with a 363% RPO growth rate relative to AWS’s most-recent 49% backlog growth rate.
As I analyzed last month, we’re seeing similar tectonic shifts involving Google Cloud and AWS per my May 1 piece headlined “Google Cloud Blows AWS Away on Q1 Backlog, Revenue Growth.” And while Microsoft and AWS both continue to offer powerful and highly successful AI and cloud businesses, the numbers laid out above underscore why, in early January, I made these changes to my Cloud Wars Top 10 weekly rankings:
- Google Cloud moved up to #1 from #2;
- Oracle moved up to #2 from #3;
- Microsoft fell from #1 to #3; and
- AWS tumbled from #4 to #7.
Final Thought
Now, it is certainly possible that when Microsoft reports its fiscal-Q4 numbers at the end of June or early July, it will reclaim the #1 spot on the RPO/backlog rankings — and if so, I will certainly explore the dynamics of that.
But, the larger points here and now is that no one “owns” first place, and that we should come to expect constant upheaval among the Cloud Wars Top 10 because of the enormous stakes involved and the intense competitive pressures that continue to spark relentless waves of innovation in the AI and cloud sectors that then reverberate out and across the entire global economy.
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