Like a bullet train racing past the slow-moving locomotive, Oracle delivered double-digit growth across most of its flagship cloud offerings in its latest quarter in addition to issuing an outlook that projects uninterrupted above-average performance in its critical last three months of fiscal 2024.
Oracle’s total cloud services revenues jumped 26% in the third quarter of FY24 to $5.1 billion, compared with $4.9 billion for its license support revenues, which marks the first time in Oracle’s history that its cloud services revenues exceeded its conventional license support revenues, a turning point that underscores the evolution of the vendor as much as the resiliency of its database and applications business.
Oracle’s total revenues rose 7% to $13.3 billion, compared with the 5% rise in the second quarter and 9% in the first quarter. The 7% addition in the third quarter includes Cerner contributions and Oracle reported that the majority of Cerner customers have been ported to run on its latest cloud infrastructure, allowing for greater upside potential for easier upgrades and reduced expenses for these Cerner healthcare customers to align their platform support with that of Oracle Cloud Infrastructure (OCI).
With unmistakable and uninterrupted growth, most of its Cloud operations, including its OCI products and services, Fusion Cloud ERP applications, and other SaaS product brands like Oracle NetSuite, posted high double-digit growth during the quarter. OCI soared 49%, Oracle Cloud Applications went up 14%, Oracle Fusion Cloud ERP gained 18% and Oracle NetSuite topped 21% as those increases were almost identical to those it registered in the second quarter.
By comparison, recent announcements from cloud rivals like Adobe and Salesforce posted about 11% growth in their latest quarter and they expect pretty much the same for the current period.
For its Q4FY24, CEO Safra Catz expects Oracle to post another 22% to 24% growth for its total cloud business without factoring in Cerner, similar to what it achieved in Q3. In other words, its cloud business could grow twice as fast as its competitors. Microsoft is the only exception with the Redmond company projecting 22% to 24% growth in its Microsoft Cloud operations in its current quarter. Other parts of Microsoft except gaming could fall short of that.
It is premature to declare Oracle’s cloud evolution a winner at the expense of its competitors but suffice to say that its recent progress has set it apart.
As Steve Miranda, executive vice president of applications development at Oracle, put it during his keynote at the recent Oracle CloudWorld in London: “Businesses need to achieve more in an uncertain world.’’ And Oracle’s consistent performance during the uncertainties demonstrates the fact the vendor has mastered the art of running a global software juggernaut by leveraging its strengths in rolling up the superregionals – more on that in a minute.
During the Oracle CloudWorld event, Miranda unveiled a host of initiatives focusing on Generative AI enhancements to its core products such as insight narratives in Oracle Cloud ERP for financial management, predictive forecast explanations, project program status and summary generation.
In Oracle Fusion Cloud Supply Chain & Manufacturing (SCM), Oracle’s Gen AI capabilities will allow users to access better summarization of what the underlying data have been able to support and interpret, all designed to enable what Oracle calls Smart Operations for Manufacturing and Maintenance. With these updates, manufacturers like Lemo, a connector maker in Switzerland, can turn to Oracle for standardized processes and systems for finance, distribution and manufacturing with continuous AI innovations and updates from its use of Oracle Fusion Applications. That in turn will help Lemo ensure on-time delivery, reduce supplier risks, optimize inventory management, and improve warehouse efficiency.
Also, during the event, telecom equipment maker Nokia expressed an interest in the use of Gen AI innovations to help it achieve greater success in recruiting and other HR processes after standardizing on Oracle Fusion Cloud Human Capital Management (HCM).
For customers that list sustainability among their top priorities over the next decade, Oracle executives pledge that its OCI will use 100% renewable energy and the company will achieve Net Zero emissions by 2025.
Oracle is already laying the groundwork having invested $1.4 billion for a 29% stake in Ampere Computing, which promises to cut the cost of data center operations in half by reducing energy consumption and real estate requirements, optimizing rack space, and lowering one’s carbon footprint. In its latest 10Q filing, Oracle states it could boost its investment in Ampere by effectively gaining control of the company and its chip assets.
Miranda takes one step further by announcing that its Oracle Fusion Cloud Enterprise Performance Management (EPM) for sustainability will align with all global standards for environmental data collection, predictive planning and reporting, effectively overhauling how ESG measurement and compliance are currently being done at many companies.
All these developments are playing out against the backdrop of the emergence of superregionals that have popped up all over the world.
The 1992 creation of NAFTA, which ushers in a free trade zone across the North American region, was probably the precursor to the superregional concept. That was followed by the EU a year later. Now such economic forces are manifesting themselves in overt or covert fashion regardless of the shifting national sentiments at the local level.
When it comes to Cloud software development, one can almost align that with the creation of regional cloud data centers by the likes of Oracle and Microsoft. As a starter, during the earnings call, chairman Larry Ellison said it is building an AI data center in Salt Lake City that covers the size that can fit eight 747 airplanes, or more than a full acre for one standalone structure.
While the creation of a cloud superregional that covers the US, Canada, Mexico and much of Latin America is to be expected for someone like Oracle, which has millions of customers in the Americas, it is putting the final touches on others.
Last week, Oracle announced that Oracle Database@Azure will expand to five more regions, which brings the total planned multicloud availability footprint to 15 regions globally.
In Western Europe, that means Germany West Central, France Central, Italy North, Sweden Central, and United Kingdom South. In Asia that refers to Central India, Japan East, Australia East, and Southeast Asia. The remaining regions are: East US, South Central US, Central US, Canada Central, Brazil South, and United Arab Emirates North.
During the earnings call, Ellison also spoke of the use of Gen AI to help countries like Serbia and Albania navigate the rules and regulations greatly reducing the time needed to prepare paperwork as part of their applications to become part of the EU. What it suggests is that Oracle will find ways to seamlessly integrate much of Eastern Europe into the EU as one big superregional across the continent.
The same applies to the Asia region. Recent interviews between ARTW and manufacturing companies in Southeast Asia highlight the fact that most are in favor of improving their business processes through digital transformation, especially when it comes to wider use of ESG reporting in order to gain broader acceptance by buyers in the West by burnishing their credentials in carbon emissions management, waste and materials management. That could lead to better differentiation against low-cost manufacturers in China.
Over the past few decades, both Japan and Korea have exerted considerable influence over many parts of Southeast Asia. In both Vietnam and Thailand, for example, Japan and Korea have been making substantial Foreign Direct Investments to the tunes of $71 billion worth of current projects just from Japan in Vietnam alone.
During the earnings call, Ellison said its success in helping Tokyo Stock Exchange to move its operations to the Cloud could be a harbinger of things to come as the vendor is expected to grant Japanese multinationals the rights to resell its cloud data center offerings to other countries in Asia.
Our assumption calls for cloud vendors accelerating their superregional strategy across Asia and Europe. While Oracle may have no plans to set up a dedicated cloud region in Greater China region, it is just a matter of time before it figures out how best to help multinationals that have exposure to the Greater Bay Area to optimize their Cloud assets.
Customer highlights from Oracle Q3 FY24 earnings
Source: Apps Run The World, March 2024
- Clover Infotech, a India based Professional Services organization with 3841 Employees
- Profinch Solutions, a United Arab Emirates based Professional Services company with 10 Employees
- Bank of Hope, a United States based Banking and Financial Services organization with 1244 Employees
| Logo | Company | Industry | Employees | Revenue | Country | Evaluated |
|---|
Research Methodology
ARTW Technographics Platform provides customer insight and contextual information on what types of enterprise software systems and other relevant technologies are they running and their propensity to invest further with their current or new suppliers as part of their overall IT transformation projects to stay competitive, fend off threats from disruptive forces, or comply with internal mandates to improve overall enterprise efficiency.
The result is a combination of supply-side data and demand-generation customer insight that allows our clients to better position themselves in anticipation of the next wave that will reshape the enterprise software marketplace for years to come.
