Release Date: December 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Oracle Corp (ORCL, Financial) reported total revenue at the high end of constant currency guidance, with EPS exceeding expectations by a cent.
- Cloud services and license support now represent 77% of total revenue, driving overall revenue growth.
- Cloud revenue is expected to reach $25 billion this fiscal year, with significant growth in AI workloads and multicloud agreements.
- Infrastructure cloud services have an annualized revenue of $9.7 billion, with OCI consumption revenue up 58%.
- The remaining performance obligation (RPO) grew 50% in constant currency, reflecting strong customer demand and longer contracts.
Negative Points
- Currency fluctuations negatively impacted revenue and EPS, with a 2% negative effect on revenue and a $0.03 negative effect on EPS.
- Free cash flow was negative $2.7 billion for the quarter, despite positive operating cash flow.
- The non-GAAP tax rate was higher than expected, impacting EPS by $0.02.
- CapEx is expected to double in fiscal year 2025 compared to FY24, indicating significant investment requirements.
- An investment loss in another company is expected to negatively impact Q3 EPS by $0.05.
Q & A Highlights
Q: Can you explain how the architectural difference of Oracle Cloud Infrastructure (OCI) impacts data center regions and CapEx growth?
A: Lawrence Ellison, Chairman and CTO, explained that Oracle's data centers are modular, starting with six racks for the smallest region, scaling up to 1.6 gigawatts for the largest. This modularity allows Oracle to deploy smaller footprints initially and expand as needed, aligning CapEx with revenue growth. Safra Catz, CEO, added that this flexibility helps Oracle match capital expenditure with revenue, enhancing profitability.
Q: What is the progress on database migration to the cloud and its revenue contribution?
A: Safra Catz noted that cloud database services have reached an annualized revenue of $2.2 billion, primarily from OCI. The multi-cloud strategy with partners like Microsoft, Google, and AWS is still in early stages but is expected to become a multi-billion dollar business. Lawrence Ellison highlighted the demand for dedicated cloud regions for regulatory and sovereignty reasons, which Oracle uniquely offers.
Q: How does Oracle maintain leadership in AI infrastructure and GPU super clusters?
A: Lawrence Ellison emphasized the importance of both large GPU clusters and fast networks to move data efficiently. Oracle invests heavily in network infrastructure to avoid bottlenecks, ensuring that AI training remains fast and efficient, maintaining Oracle's competitive advantage.
Q: What is driving the growth in Oracle's SaaS business, particularly in back-office systems?
A: Safra Catz stated that companies are under pressure to be more efficient, leading to increased interest in Oracle's back-office systems. Oracle's systems offer automation and AI capabilities that help companies reduce costs and improve customer service. The pipeline for these services is strong, with booking trends accelerating significantly.
Q: How have OCI gross margins progressed, given the growth in GPU business?
A: Safra Catz reported that OCI gross margins continue to improve due to Oracle's efficient cloud operations and software optimization. Despite the perception that GPU business might be less profitable, Oracle's margins in this area are improving, benefiting from scale and automation.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
