Q3 2024 Earnings Summary
- Oracle is uniquely providing sovereign cloud and dedicated cloud regions to governments and large enterprises, an area where competitors do not operate, leading to significant new growth opportunities.
- Oracle's Infrastructure as a Service (IaaS) revenue grew 49%, driven by enormous demand, and they have over 40 new AI bookings over $1 billion that haven't come online yet, indicating strong future revenue growth.
- Oracle's advancements in AI applications and Autonomous Database, including integrating generative AI across applications and reengineering solutions like Cerner to leverage AI, are expected to drive demand and adoption across multiple clouds, maintaining their leadership position.
- Oracle plans to significantly increase capital expenditures to approximately $10 billion in fiscal year 2025, up from $7–$7.5 billion in the current fiscal year, to build new data centers and expand existing ones, which could pose execution risks and strain financial resources.
- The aggressive expansion into building some of the world's largest data centers, including AI data centers where construction delays and supply constraints are already being experienced, may lead to overcapacity and impact profitability if demand does not meet expectations. ,
- Oracle's success is heavily dependent on the availability of critical components like GPUs and infrastructure such as power and communication links, and any shortages or delays could hinder their ability to meet customer demand and achieve projected growth. ,
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CapEx Guidance Increase
Q: What's the CapEx outlook given RPO growth?
A: Oracle plans to spend $10 billion on capital expenditures in fiscal year 2025 to build new data centers and expand existing ones, driven by significant demand growth reflected in an $80 billion RPO. This investment is crucial to meet customer demand and support future revenue growth. -
Infrastructure Demand & RPO Growth
Q: Is IaaS growth due to shifting focus to large deals?
A: The 49% growth in Infrastructure as a Service is from regular business, not from reallocating resources to large OCI deals, which is still to come. Oracle has enormous demand, with at least 40 new AI bookings over $1 billion pending. The $80 billion RPO indicates accelerating demand exceeding current capacity. -
GPU Availability & Data Center Expansion
Q: How is GPU availability affecting growth plans?
A: Oracle has a strong relationship with NVIDIA, ensuring good GPU access. The main challenge is building data centers quickly to meet demand, not GPU supply. Oracle is constructing massive data centers, like one in Salt Lake City large enough to park eight 747s nose to tail. -
Multi-cloud and Autonomous Database Adoption
Q: What is customer reception of Oracle Database on Azure?
A: Customers are embracing Oracle Database in OCI running on Azure, signaling the end of "walled gardens." This multi-cloud approach preserves and expands Oracle's database franchise and drives adoption of the unique Autonomous Database technology, which competitors are not attempting to replicate. -
Interest in Alloy & Sovereign Clouds
Q: How is Alloy impacting OCI growth internationally?
A: There's high interest in Alloy in markets valuing data sovereignty. In Japan, companies like NRI are reselling Oracle Cloud, even running critical applications like the Tokyo Stock Exchange. Oracle expects every government to want a sovereign cloud and is negotiating sovereign regions with national governments, potentially leading to more data centers than other hyperscalers combined. -
Government Solutions & Starlink Partnership
Q: How is Oracle involved in "government in a box" solutions?
A: Oracle is partnering with Starlink to deliver comprehensive government solutions, including internet services across entire countries like Serbia, Kenya, and Rwanda. These initiatives modernize sectors like healthcare and agriculture using AI and cloud technologies, representing significant new opportunities. -
Cerner Migration to OCI
Q: What are the implications of moving Cerner to OCI?
A: Migrating Cerner to OCI has saved substantial costs, improved security against ransomware, and enabled rapid modernization. Oracle can now update Cerner applications on a three-month cadence, delivering new features without reimplementation, enhancing value for customers.
Research analysts covering ORACLE.