As the AI Revolution transforms cloud infrastructure from a behind-the-scenes tech play into an essential element of business strategy, Oracle CEO Safra Catz has spelled out four reasons why Oracle Cloud Infrastructure revenue is booming, with last quarter’s consumption revenue up 63%.
On Oracle’s fiscal-Q2 earnings call last month, Catz said that while lower prices are certainly a factor in how OCI technologies and services are differentiated from those of the other hyperscalers, Oracle’s advantages go far beyond that.
“OCI has emerged as the largest driver of our overall revenue acceleration, growing much, much faster than our cloud competitors,” Catz said on the call. “Customers have figured out that by moving to OCI, they can really get more while paying less, but it’s not just the cost that matters to our customers.”
Catz then identified four specific factors that are, in combination, convincing more and more big enterprise customers to choose OCI for not only their AI training and inferencing workloads but also for the more traditional cloud-migration initiatives:
- Oracle’s 45-year history of handling mission-critical workloads;
- its unique AI capabilities up and down the stack;
- its unmatched portfolio of deployment options; and
- its ambitious advocacy for and delivery of multi-cloud offerings.
Why Those Four Attributes Matter to Customers
Here’s how Catz described those four factors on the earnings call.
1. Mission-critical expertise. “We know better than anyone what it takes to run the full stack of technology that goes into mission-critical workloads,” Catz said. “I’m talking about running at enterprise scale with comprehensive security and unparalleled support, and that’s from decades of experience running the world’s most-important workloads and optimizing clustering technology, which is critical to artificial intelligence workloads and database services.”
2. Broad AI expertise and services. “Secondly, our AI capabilities are unique as they’re built-in to help customers drive business outcomes,” Catz said. “This is more than integrating generative AI across our Fusion and Industry Cloud applications and Autonomous Database, which we have done. It’s also about enabling and refining these AI models with the customer’s own data to better understand and serve their operations without them losing control of their own data.”
3. Giving customers unfettered deployment options. “Third, we provide deployment flexibility for customers based on how they want to run in the cloud,” Catz said. “In addition to offering public cloud services, we remain the only vendor which also offers a dedicated and complete Cloud@ Customer, Dedicated Regions, sovereign clouds, and Alloy, our partner cloud. So, customers don’t have to compromise the services they receive while meeting their deployment needs.”
4. Multi-cloud vision and market leadership. “Finally, we provide multi-cloud offerings so customers can consume our cloud services in the public cloud of their choice,” Catz said. “We offer Oracle Database@Azure with Microsoft, as well as MySQL Heatwave through multiple clouds. And you can expect more multi-cloud services to come.”
Revenue Growth Supports Catz’s Claims
Okay, those four points all sound pretty good — but unless the numbers are squarely behind Catz’s assertions, it’s just a lot of empty talk.
But Oracle’s numbers do indeed support everything Catz said, and here are some of the most-telling details from fiscal Q3:
- Propelled by 49% growth for cloud infrastructure overall — of which OCI is a part — Oracle’s cloud revenue for the quarter ended Feb. 29 exceeded its traditional license and support revenue for the first time ever. As Catz put it, “we have crossed over.”
- OCI Gen2 Infrastructure Cloud services, excluding legacy hosting services, grew 52% to $1.68 billion.
- As noted above, OCI consumption revenue was up 63%.
- Cloud database services were up 34% to $475 million.
While those figures are impressive, the OCI growth story comes across even more clearly if we flip the arrow of time from what happened last quarter to what bookings for the future look like. Oracle’s RPO (Remaining Performance Obligation) — contracted business that has not yet been recognized as revenue — jumped 29% to $80 billion, by far the largest that number has ever been.
Both Catz and Ellison expanded on the significance of that RPO surge.
“We signed several large deals this quarter, and we have many more in the pipeline,” Catz said. “Approximately 43% of our total RPO is expected to be recognized as revenue over the next 12 months, and this reflects the growing trend of customers wanting larger contracts as they see firsthand how Oracle Cloud Services are benefiting their businesses.”
Ellison called out the RPO numbers, saying, “The growth in RPO is what’s to come. And RPO is obviously growing faster than revenue because we can’t meet the demand. That’s the measure of demand — that $80 billion RPO is quite an acceleration of demand and shows that demand is not slowing down and is in fact actually increasing quite a bit.”
Ellison also outlined Oracle’s wide-ranging efforts to ramp up data-center capacity to meet surging demand, noting that in addition to continuing to build relatively large numbers of small data centers, Oracle is also in the process of building a new type of extremely large facility that Ellison described as “the world’s largest AI data center.”
“We’re also building the largest data centers in the world that we know of,” Ellison said on the call. (You can get all the details on that in “Oracle Q3 AI Surge: 40 AI Deals Totaling $1 Billion Plus World’s Largest ‘AI Data Center’.”)
“We’re building an AI data center in the United States where you could park eight Boeing 747s nose-to-tail in that one data center. So, we are building large numbers of data centers, and some of those data centers are smallish, but some of those data centers are the largest AI data centers in the world,” Ellison said.
“So we’re bringing on enormous amounts of capacity over the next 24 months because the demand is so high for our cloud services and we need to do that to just satisfy our existing set of customers.”
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