Oracle Q1 Blowout

Bob Evans (0:00)

Hello, my friends, welcome back to Cloud Wars Minute. Yesterday, Oracle reported what I'm calling a blowout Q1, and let me talk about some of the key numbers here that formed that impression for me. First of all, their overall cloud revenue was up 62% to over $11 billion. They break that out in two ways. Their cloud apps business grew about 10%, little over $4 billion in revenue, but this is the star now. The cloud infrastructure business grew 121% to $7.4 billion.

And that is, of course, revenue is a measure of the recent past, what they posted for the quarter ended August 31st. If we flip the arrow of time forward and look into the business that Oracle has built and contracted for the future, but it's not yet recognized as revenue, their RPO, which is similar to Backlog or Pipeline, but it's fully contracted business, that was up 46% to $664 billion. So as their revenue, for the most recent quarter grows, their RPO is also for future business growing very rapidly. Plus, the company guided in Q2 that their cloud revenue will grow again, accelerate again, going into Q2, 62% here for Q1, and they're guiding for Q2 somewhere between 65% and 70%. I got a detailed article, lots of stuff on this, and a little more context coming up later this morning on cloudwars.com. But I wanted to get some of these key numbers here out in this video. Also, for the quarter there, free cash flow was negative $5 billion.

Don't want to be in the negative cash flow category, but the relatively modest size of that shows that Oracle's efforts to bring to bear technological supply chain, logistical and go-to-market innovations are helping it to narrow that gap between what it has to spend to build out these incredible AI data centers, the related infrastructure around that, with the pace of the new business that I've described here, that is coming in, the new revenue there.

I'd also want to just pose this question, consider this. So, about Oracle's achievement in having an RPO of $664 billion. So, Microsoft's current Cloud revenue is about five times larger than Oracle's Cloud revenue, right? So, much bigger. And you might say, well, they've got a much bigger Cloud revenue right now, their RPO or their backlogs probably on a similar level. But Oracle has almost matched the RPO or the backlog that Microsoft has. Oracle $664 billion, Microsoft $678 billion. I'm wondering, how does a company like Oracle, whose Cloud business is so much smaller than that of Microsoft, have a backlog that is almost as big as that of Microsoft? And the only answer that I can come up with, I think it's fairly straightforward here, is that customers believe that the future potential that Oracle has to be a leader in AI infrastructure, Cloud infrastructure, what Oracle is doing, going into the future with so many different parts of its business, the new autonomous, I'm sorry, the new AI database and so forth. More and more customers now are betting that while some of the other Cloud vendors have been very strong and the dominant players coming up, Oracle is going to be an even bigger player going into the future. I think that that's a big part of what these numbers tell us. Anyway, like I said, got more on this coming up later this morning on cloudwars.com. I hope you'll check that out. And I'll be following up in more detail next week after being able to analyze the earnings call that Oracle will be having after this earnings release. Thanks for being with us here at Cloud Wars Minute. I hope you have a fantastic day.