Oracle, Google Cloud Blaze New Trails to Fund $1 Trillion in Backlog

**Bob Evans** (0:00)
Hello, my friends, welcome back to Cloud Wars Minute. In the Cloud Wars, all sorts of crazy things are going on with the technology, what customers are doing with it, but also in how this whole remarkable time is being funded. And I just want to start by saying, you know, right over there is Wall Street. And there's a lot of smart people over there. I think there's some people who aren't quite so smart. And some, if I may say this, I have an uncle who always liked to say, I couldn't find his own ass with two hands and a map. And I think there's some people over there who don't really understand what Google Cloud and Oracle have been doing in blazing the way for new ways to fund this expansion of the AI data centers to meet customer demand, unlike anything the world has ever seen. And it isn't just a case of taking what's always been done before, the same old models, the same approaches, doing it this way. These are things that I'm going to share some numbers here. Nobody's ever seen before, and I think that sort of new possibility, new future requires new ways of doing things. So I want to talk a little bit today about how these two companies, through Google Cloud Parents Alpha, that are choosing to fund this unprecedented market demand. So this total of a trillion dollars in backlog, in Oracle's most recent quarter, it reported that its RPO, or remaining performance obligation, similar to backlog, is over $550 billion. That's fully contracted business that hasn't yet been recognized as revenue. For Google Cloud, they had an amazing jump as well. In their most recent quarter, and in March 31st, $462 billion in backlog almost doubled what it had been a year before that. So there's amazing demand. These two companies are totaling a trillion dollars. Traditionally, the hyperscalers that's from AWS, Microsoft, Google Cloud, and Oracle have funded all this massive data center build out through their own internal means. Six months ago, Oracle reached out and said, no, no, we're going to go to some outside funding, some borrowing to do that. They hope this calendar year that it will be somewhere between $40 and $50 billion to chase a demand that's ten times that high.
But the market reacted with a panic, and it's, my God, nobody's ever done this. And what if they can't pay it back? And what if OpenAI, which Oracle has some big contracts, what if they can't pay? What if, what if, what if? So all this knicker nodding is a little bit crazy.
Hold on now, what's going on?
Anyhow, so there's a lot of skepticism about Oracle's plan six months ago. Now, a week ago, we see Alphabet steps up and says, hey, we're gonna do some equity financing. Gonna take 10 billion from Warren Buffett and some other places. We need this money. We think it's the best way to pursue funding our own data center expanses, our CAPEX needs, which Alphabet said in this calendar year, will be somewhere between $185 and $190 billion.
Oracles are not that high, but it's still gonna be significant, probably around $75 billion for Oracle. So these companies are saying to meet this new demand, we need some new approaches to it. I think seeing Alphabet, and now it's going back and forth with Microsoft, the most valuable company in the world, $4.5 trillion to see a company like Alphabet step in and say, you know what, there are other ways we can use outside funding to meet the needs for this AI data center expansion that are outside of what people have typically done. That's because the demand is leading the way on this. This demand is just, again, it's unlike anything the world has ever seen. So I don't know why some people over there on Wall Street and other places feel like, hey, it doesn't matter what's going on outside and what this future demand is. You got to do things in the same way everybody else has always done it or else we can't understand it.
We don't recognize what's going on here.
I think, as I talked about in the last couple of years, Oracle and Google Cloud have risen to the top of the Cloud Wars top 10, above Microsoft, and way past AWS because they brought innovation at levels in technology and go to market. They think about customers, deployment models, and so forth that have really sort of set the new standard for what's happening in the AI Cloud business. Now with what they've both been doing, seeking outside funding to meet this demand, unlike anything the world has ever seen before, shows another way to do it. And I wouldn't be surprised if after Alphabet's move last week, we see sometimes later this year, either Microsoft or Amazon, or perhaps both companies say we're gonna go to some outside funding as well to help meet this AI data center expansion, which is really the foundation for the new AI economy around the world. Thanks, I'll have a detailed article about this on cloudwars.com, offering a lot of perspective and numbers on this. It's truly a remarkable time. Thanks for being with us here at Cloud Wars Minute, and I hope you have a fantastic day.