Oracle CEO Safra Catz was in ebullient mood yesterday as the software giant turned in a strong set of quarterly numbers, despite the prevailing headwinds seen elsewhere in the enterprise tech space.
For Q2, Oracle turned in revenue of $12.28 billion, up 18% year-on-year, while net income was $1.74 billion, turning around a loss of $1.25 billion for the same period last year. Cloud infrastructure revenue was up 53% year-on-year to $1 billion. Cloud revenue - IaaS and SaaS - was up 43% to $3.8 billion, while applications revenue was up 40% to $2.8 billion.
It’s all down to “a few key points of differentiation”, according to Catz:
First, more and more customers are recognizing our second-generation infrastructure cloud as being fundamentally better architected for higher performance, better security, and unmatched reliability versus the older first-generation hyperscale cloud providers.
Second, customers appreciate the flexibility of our service and business model that enables them to deploy our technologies where it serves them best, whether that be in the public cloud, in dedicated regions around the world, or in a true [email protected] implementation.
And third, customers recognize the value of an end-to-end integrated stack of applications, both horizontal, like ERP and HCM and supply chain, and industry-specific applications that focus on
their industries.
Wins
Chairman and CTO Larry Ellison picked up on key customer wins in the quarter, starting with the infrastructure business where he said “multiple customers” out of 22,000 have now signed contracts for “$1 billion worth of infrastructure”. He cited the Tokyo Stock Exchange as a case in point:
We're the only ones running a major stock exchange. Tokyo's not the only one, because our cloud is very secure and extremely reliable. It doesn't go down. In fact, my favorite quote from a big phone company in the United States was, ‘The difference between Oracle's cloud and the other clouds are simply that Oracle's cloud doesn't go down’. I think that's a very important issue when you have enterprise applications, like a stock exchange, where you can't ever go down. Fujitsu is another big customer.
Vodafone - phone companies, similar problems. If you're a phone company, the phone system can't go down. Vodafone, Deutsche Telekom, Enbridge. Kaiser, a huge healthcare company primarily in the United States. Nvidia's moved and a bunch of others have moved lots of AI, artificial intelligence and machine-learning workloads to the Oracle Cloud Because what it turns out, we're really good at that. We're better than that than any of the other clouds, which may surprise some people. Schneider Electric, Telecom Italia, Verizon, and lots, lots more.
Ellison also pointed to Oracle’s partnership with Microsoft as indicative of how the future is multi-cloud in nature:
We think that is the future of cloud. We think the future of cloud is not, you know, four walled gardens - AWS, Microsoft, Google, and Oracle. We think those clouds are all going to interconnect. And then, customers will pick the most appropriate service for their particular needs and mix and match between the clouds.
In terms of the applications business, Ellison said there are now 11,000 Fusion ERP and HCM customers, with a further 30,000 NetSuite customers on top of that. And given the Cerner acquisition is now five months in, he also flagged up healthcare use case go-lives:
Tenet Health, at 65 hospitals, 235,000 employees, they went live on HR, payroll, and recruiting. Cleveland Clinic is going live. I know it's called Cleveland Clinic, but they also own hospitals all over the place. They've gone live in a bunch of regional hospitals in Florida. University of Chicago Medical Center has gone live. Baptist Health Care has gone live, 12 hospitals with 26,000 employees. Lacey Center has gone live in the quarter. So, we're just getting stronger and stronger in healthcare.
As for how the integration of Cerner into Oracle is proceeding, Catz commented:
I will tell you that they continue to do better than we had projected internally. So, we're very, very happy. But we are still at the beginning. You know, we don't want to do anything that will damage the business. And, of course, we're very, very focused on those customers, but we are already having some level of savings. But ultimately, just so that you understand, our expectation is we will run them at typical Oracle margins.
So, we've got quite a way to go. And I think over the next couple of quarters, you'll see continued improvement as we've done some of our operational integration. And simultaneously, I think they continue to over-perform for us. So, we are doing this in a very careful way so as not to put any issues for our customers and making sure they're successful.
My take
A Wall Street pleasing set of numbers as the long cloud game of the past few years continues to pay off.
