Oracle has achieved a major milestone as the cloud has become not just the aspirational but also the financial heart of the company’s business with fiscal-Q3 cloud revenue surpassing license-support revenue as the biggest contributor to the company’s overall business.
That metric reflects a long and sometimes challenging transformation for Oracle, which has not only completely rewritten its massive software portfolio for the cloud but has also created two hypergrowth cloud and AI businesses as well:
- Oracle Cloud Infrastructure (OCI) grew at 52% for the quarter ended Feb. 29, and both chairman Larry Ellison and CEO Safra Catz have said they expect that growth level to continue for the next two or three years; and
- Oracle’s broad range of AI services have become a massive catalyst for OCI’s growth.
- On Oracle’s March 11 earnings call, Catz cited enormous demand from AI companies, which I dug into in a recent analysis headlined “Oracle Q3 AI Surge: 40 AI Deals Totaling $1 Billion Plus World’s Largest ‘AI Data Center’.”
So while it has been inevitable that Oracle’s cloud revenue would at some point overtake its traditional revenue, the company reached that point sooner than many people would have expected because Oracle’s cloud business has, for the past couple of years, been growing faster than any other company in the Cloud Wars Top 10.
On Oracle’s Q3 earnings call, CEO Catz noted the achievement but did not dwell on it, and I suspect that reflects the thinking within Oracle that the milestone, while significant, should not be confused with the ultimate destination. And that ultimate goal is for customers to make Oracle one of the world’s largest and most successful suppliers of cloud and AI innovation for the cloud-enabled and AI-powered digital age.
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Total quarterly cloud revenue, including Cerner, rose 25% to $5.1, including infrastructure revenue up 49% to $1.8 billion and software-as-a-service (SaaS) revenue up 14% to $3.3 billion.
“This quarter marks the first time our total cloud revenue is more than our total license support revenue,” Catz said.
“So we have crossed over.”
She then said that total cloud services and license-support revenue for the quarter was $10 billion, up 11%. Subtracting the $5.1 billion in total cloud revenue from that aggregate revenue figure of $10 billion, we can conclude that the traditional license-support revenue totaled $4.9 billion.
So cloud topped traditional revenue by $5.1 billion to $4.9 billion — and we can be certain that those two numbers will never again be anywhere near as close to each other.
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