Larry Ellison - how Oracle will maintain database share in the multi-cloud era

For its first full quarter with Cerner under its belt, Oracle turned in a strong fiscal Q1 2023 with revenues continuing to climb on the back of continued cloud growth.

For Q1, total revenues were $11.445 billion, up 18% from $9.728 billion for the comparable quarter last year.  Net income was down from $2.457 billion last year to $1.548 billion this year,  largely due to the firm’s investment in expanding out its cloud infrastructure. Other stats:

• Cloud services and license support was up from $7.371 billion last year to $8.417 billion this year.
• Hardware revenues were flat at $763 million.
• Fusion Cloud ERP revenue was up 33%, while NetSuite ERP revenues were up 27%.

In the post results announcement analyst call, Chief Technology Officer Larry Ellison drilled down on what he dubbed “the multi-cloud era”:

Customers are already buying applications and cloud infrastructure from several different providers, including Microsoft, Amazon, Salesforce, Oracle and others. Our job is to give our customers the ability to choose application and infrastructure technology from multiple clouds and then have those different clouds co-exist and interoperate gracefully.

Multi-cloud interoperability is an important step in the evolution of cloud computing. Multi-cloud interoperability is one of the reasons our infrastructure business is booming, growing over 50% in US dollars, and almost 60% in constant dollars. We expect Oracle's total cloud business to exceed a $20 billion annual run rate next year.

He pointed to the announcement earlier this year that Microsoft and Oracle had built a high-speed interconnect between Azure Cloud and Oracle Cloud:

The purpose of this multi-cloud interconnect is to enable Azure customers to directly use the very latest Oracle Database technology, even if their application is running in Azure. In other words, customers can now use any combination of Microsoft and Oracle Cloud services together as if they were in one cloud.

That was last quarter. This quarter, Oracle is making the latest version of our MySQL HeatWave database available in Amazon's AWS cloud. Multiple published customer benchmarks have shown that MySQL HeatWave delivers 7x better performance than Amazon Redshift. 10x better performance than Snowflake and up to 10x higher throughput than Amazon's own MySQL database called Aurora.

This multi-cloud era should benefit Oracle, he added:

I think one of the issues I know a lot of people for years have been concerned about is, can Oracle sustain its leading market share in the database business? And I think what is clear is if our databases are available in multiple clouds, I think then the answer is clearly yes. If our database is not available in multiple clouds, then it's an interesting question whether we can and maintain it just in our own cloud.

We've decided to make our best and greatest technology available in multiple clouds. And that gives customers choice. They can use it in OCI (Oracle Cloud Infrastructure). They can use MySQL HeatWave at AWS. They have choices, but they will be able to choose between, let's say, Amazon's Aurora or Oracle's MySQL HeatWave. They will be able to choose between Snowflake or the Oracle Autonomous Database. And I think as long as we're available in multiple clouds, we're going to be very strong and very, very competitive against these other companies and these other technologies.

Customers 

With that, the focus was on rolling out Oracle infrastructure wins, such as NVIDIA, Avis and Santander Bank:

NVIDIA chose OCI to build their SaaS products for data scientists for machine learning and inferencing along with moving their entire health care platform called Clara to OCI…The Avis car rental company is moving their entire Oracle estate, along with their Oracle applications to OCI…Santander, a large bank is moving all of their databases from mainframes and Oracle databases all to the Oracle Exadata Cloud Service. 

Customers are buying into the strength of the Oracle product, argued CEO Safra Catz:

When customers try us for some reason, whether they're using Fusion and they start using OCI for their own applications, or they hear really from word of mouth and from really a need to run some of their Oracle workloads or otherwise, when they give a try to Gen2 OCI or to Fusion, for that matter, what they find is that it is phenomenal.

Our Gen2 cloud is so much better than what they're used to, and is so much more flexible, and can be much more local, gives them so many more opportunities to really match to their own needs. But they're overwhelmed by the technical capabilities of our cloud and how great it is. So what happens is, they may start small, and then they accelerate in their consumption. And they sign larger and larger and more significant contracts.

To which Ellison added, Oracle has benefited from ‘eating its own metaphorical dog food’:

We are the only infrastructure company that builds enterprise scale applications. As a result of building these enterprise scale applications, we have made our infrastructure much, much better. So we not only provide infrastructure and sell infrastructure, we consume the infrastructure ourselves. I think that gives us certain insights as to what we need to build at the infrastructure layer to make our application secure, reliable…and easy to use and make people productive.

I think that's why what customers are discovering when they come to our cloud, that they're more productive, the system runs faster, it's more secure, it's easier to use, all of that. And that's what gives us confidence that we can build the next generation of health care applications, because we do both. We do both applications, enterprise applications and infrastructure. And we're the only one.

My take

We expect to have our first pretty complete new Cerner health management product out within 12 months.

If anyone was expecting much more flavor around the Cerner acquisition and plans, they were going to be basically disappointed as the next steps earned only a few sentences on the analyst call. Otherwise the emphasis was very heavily on infrastructure cloud, with even Fusion and NetSuite, both of which continue to deliver high growth numbers, also getting comparatively little attention compared to previous analyst calls. Overall, a good solid quarter with continuing cloud growth and a positive outlook.