After almost 50 years of being the tech industry’s unrivaled master of the long game, Oracle Chairman Larry Ellison is proposing a bet so audacious that he’s likely to get some takers despite the very clear historical record showing quite clearly that betting against him is a losing proposition.
On Oracle’s recent fiscal-Q4 earnings call, Ellison proclaimed the following:
- Oracle will be the #1 cloud-database company;
- Oracle will be the #1 cloud applications company; and
- Oracle will be “the #1 builder and operator of cloud-infrastructure data centers,” ultimately building and operating more of those 21st-century factories “than all of our cloud-infrastructure competitors combined.”
Amid a cohort of world-class competitors led by Microsoft, Google Cloud, Amazon, SAP, and Salesforce — not to mention a couple of hundred new-tech database vendors representing the latest wave of so-called “Oracle killers” that, ultimately, rarely even lay a glove on Oracle — Ellison and his company seem to have finally hit the overreach button with all that ambition.
Right?
Because, well, nobody can be #1 in each of those very different categories, right? Heck, it would be a monumental feat for Oracle to reach #1 in just two of those three categories — so maybe Ellison should just settle for that.
Right?
Well, that’s the conventional outlook.
And that’s how 99% of the world would view the situation here in the hypercompetitive Cloud Wars, populated by many of the world’s biggest, wealthiest, most-powerful, and most technologically advanced businesses.
But that is absolutely, positively not how Larry Ellison sees it.
So let’s look at that bet he’s making across the three different layers of the cloud swept up in his mega-wager.
1. Being #1 in cloud databases. “Most of the world’s most valuable data is stored in an Oracle database,” Ellison said on the call, “and all of those databases are moving to the cloud — Oracle’s cloud, Microsoft’s Azure cloud, Amazon’s cloud, or Google’s cloud — and Oracle runs everywhere.”
And that multicloud approach is proving to be hugely popular among customers, Ellison said, with sequential quarter-to-quarter revenue growing 115% as customers deploy in the clouds of their choice:
“We’re seeing huge growth in MultiCloud from the data centers we’ve already built…. But the future growth rate in MultiCloud is astonishing. In other words, our database is now moving very rapidly to the cloud because of a few reasons: Because the database has now all these AI capabilities, and also because quite frankly now people can get it in whatever cloud they want. If you’re dedicated to using Microsoft Azure, you can get the fully capable Oracle Database and Microsoft Azure with all of our fanciest features, including the new AI features. You can get [Oracle Database] at Google. You can get it at Amazon,and you can get it at the Oracle Cloud.
“It’s all the same in every cloud, and that’s given our customers a lot of comfort that Oracle is not only where they store all of their current data and that they want to keep using the Oracle Database and expand their use of the Oracle Database and move all of that data to the cloud as quickly as they can, but also they’re now able to do it in the cloud of their choosing.”
And the newest version of the Oracle Database — called Oracle 23ai — is specifically designed to meet the requirements of AI-focused customers. Ellison described Oracle 23ai as an “AI Data Platform, the only database that can make all of the customer’s data immediately available to all of the popular AI large language models, while maintaining complete data privacy for the customer.”
So as Ellison sees it, “As use of AI increases, so will Oracle’s database market share.”
Bob’s take: I am 100% confident Ellison and Oracle will reach Ellison’s goal of being the #1 provider of cloud databases. The market for cloud databases is enormous, and no doubt many of those so-called “Oracle killer” startups and high-growth youngsters like MongoDB and Cockroach and others will do very well without ever doing much to seriously threaten Oracle’s mortality. But the large-scale forces Ellison describes above are far bigger and more powerful and more comprehensive than the collective impact of the challengers, as shown in some database growth and revenue figures from CEO Safra Catz:
- Cloud database services rose 31% with an annual run rate of $2.6 billion;
- Autonomous Database consumption revenue jumped 47%, “as on-premise databases migrate to the cloud, either on OCI directly or through our Database@Cloud services” with Azure, Google, and AWS.
Catz is banking on cloud-database revenues to become “the third driver of revenue growth, alongside OCI and strategic SaaS.” Oracle now offers its multi-cloud Database@Cloud services in 23 regions and is expanding that to 47 additional regions, Catz said.
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2. Being #1 in cloud applications. In my view, this will be the most difficult portion of the wager for Ellison to win because, while its applications business did better last quarter, total SaaS revenue for the year was $13.4 billion, up 10%. To put that in comparison, Salesforce’s revenue for its fiscal Q1 ended April 30 was $10 billion — and while some of that is for non-apps products and services such as platform, Salesforce’s comparable apps revenue is probably in the range of $32 billion to $36 billion. That’s about 2.5X larger than Oracle’s apps revenue.
But Ellison is always focused more on creating new opportunities rather than being daunted by how big an incumbent might be — and as you’ll see in his comments below, he is particularly excited about the huge new impact AI agents are having and will have on applications.
“Oracle will be the largest and most profitable cloud applications company in the world,” he said on the call. “Oracle develops suites of integrated AI-agent-based applications for ERP, for EPM, supply chain manufacturing, human resources, and customer engagement, plus industry applications for healthcare, banking, utilities, retail, hospitality, and many other industries.
“We use the most modern application generators and AI database technology to build our application suite, and then we add AI and analytics using OpenAI, X.ai, Google Llama, and other popular LLMs…. No other company is even attempting to build the depth and breadth of AI-based applications that we have already built.”
Bob’s take: While Oracle’s cloud-apps business is growing more rapidly than Salesforce’s, it is not growing nearly as fast as SAP’s — and that’s why I think this portion of Ellison’s 3-part wager is the riskiest. However, Safra Catz is not given to hyperbole — never has been — so when she said during her opening remarks on the call that Oracle is “well on its way” to becoming “the world’s largest-cloud application company,” the combination of her pragmatic optimism and Ellison’s vision and bullishness makes it hard to say no in spite of the odds.
3. Being #1 builder and operator of cloud and AI data centers. Because Oracle’s advanced infrastructure technology allows it to build cloud data centers with much smaller footprints than those of its competitors, it has already outpaced Microsoft, Google Cloud, and AWS on this front and will almost certainly widen the gap.
As for the terms of this goal, please note what Ellison did not say: choosing his words carefully, Ellison focused on Oracle having more cloud data centers than any of its competitors, rather than saying it would be “#1 in cloud infrastructure.” That’s a big distinction and one we should bear in mind — but I’m not saying that to trivialize what Oracle’s doing with its commitment to building and operating more data centers than anybody else. Rather, it’s a key element in Oracle’s highly differentiated cloud strategy and has been a huge contributor to the enormous growth of Oracle’s OCI business.
“Oracle will build more cloud-infrastructure data centers than all of our infrastructure competitors combined,” Ellison said on the call.
“All of our OCI data centers — from the smallest low-cost data center to the largest gigawatt AI-training data center — include all Oracle OCI capabilities. A large percentage of those capabilities are autonomous, so labor costs are minimized and human error is dramatically reduced.”
So why is it so important for customers that Oracle — which until very recently was a software company that mostly built code along with a small amount of very advanced hardware — masters in its second half-century the art and science of building massive data centers and harnessing nuclear energy? Here’s Ellison’s take:
“We recently got an order that said,’We’ll take all the capacity you have, wherever it is — it could be in Europe, it could be in Asia — we’ll just take everything.’ I mean, we never got an order like that before. We had to move things around and we did the best we could to give them the capacity they needed.
“The demand is astronomical, and now we have to — but we have to do this methodically. The reason demand continues to outstrip supply is we can only build these data centers and build these computers so fast. And we’re also doing a lot of engineering around high-speed networking. You’ll see us making large, large engineering investments to increase the speed and the reliability of the networking and to lower the cost of the networking.
“So we’re doing a bunch of things to lower our CapEx costs. But even if we do that, CapEx is going to go up because the demand right now seems almost insatiable. I mean, I don’t know how to describe it. I’ve never seen anything remotely like this.”
Bob’s take: With all the progress Oracle is making on this front, and with the company’s future growth strategy centered on its ability to have data centers in every country and near every major city in the world, this portion of the bet is about as safe as possible.
Final Thought
As I see it, Oracle becoming #1 in cloud databases is a lock, and Oracle becoming the #1 builder and operator of cloud databases is pretty much a lock.
For Ellison and company, the tricky part will be cloud apps, in which Salesforce has a huge lead while SAP is close to parity in cloud apps with Oracle, but is growing much more rapidly in that space.
So: will you take this bet against Larry Ellison?
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