Oracle Q3 2024: Ellison says 'AI infrastructure business is booming'

“We've got at least 40 new AI bookings that are over a billion dollars that haven't come online yet,” Oracle CEO Safra Catz said

GenAI fuelled infrastructure revenue for Oracle in its most recent quarter, with the database products and services vendor's top two executives promising more to come.

Larry Ellison, Oracle co-founder and CTO, told listeners on the Texas-based company's quarterly earnings call Monday that Oracle is bringing GenAI to a wide range of industries - highlighting a digital assistant for ambulatory clinic systems and the technology's work in aligning Albania's laws with the European Union's to speed up the country's EU entrance.

"Oracle's Gen 2 AI infrastructure business is booming," Ellison said.

"That's become pretty clear to everybody."

Earlier last year, she had already called genAI a boon to Oracle's database business.

Oracle AI opportunity

When asked by an analyst about a "herculean increase in new business" needed to grow Oracle's infrastructure-as-a-service (IaaS) revenue 49 per cent year-over-year, Oracle CEO Safra Catz credited growth with existing and new customers.

"There are many, many customers who have come on and that haven't gotten capacity yet," Catz said.

"We've got at least 40 new AI bookings that are over a billion (dollars) that haven't come online yet."

Ellison also credited Oracle's ability to build cloud data centres of various sizes, sharing that the vendor is at work on one in the U.S. "where you can park eight Boeing 747s nose to tail in that one data centre."

The executives stressed Oracle's work meeting demands, with Microsoft already adding on three more data centres on top of 20 Oracle was already building.

"We're bringing on enormous amounts of capacity over the next 24 months," Ellison said.

"The demand, the demand is so high. We need to do that to just satisfy our existing set of customers…We're seeing demand for data centres of people who want to buy Alloy and then resell our cloud services with their proprietary cloud services on top of it."

Ellison predicted on the call that Oracle "will end up with more data centres and cloud regions than all the other hyperscalers combined."

Oracle has 13 live dedicated and Alloy regions, 18 under construction and five new ones signed during the quarter.

"Microsoft does not compete for this business," he said.

"AWS does not compete for this business. Google does not compete for this business. We're the only ones in this business."

Oracle's CapEx, partnerships

Catz said that Oracle's fiscal year 2025 should include $10bn in capital expenditures.

"It also involves not only some big centres, but it also involves expansion of existing centres - so we've already got some areas that we'll be filling out," she said.

When asked if Oracle will run into graphics processing unit (GPU) constraints plaguing other technology companies, both Catz and Ellison said the vendor is good to go and that electric power and communication connections are the bigger constraint.

Ellison said that Oracle's partnership with Nvidia has helped and pointed to the vendor's ongoing collaboration with Microsoft as a way to grow use of Oracle offerings in the cloud and migrate customers to Oracle's Autonomous Database, predicting further customer adoption of multi-cloud environments.

"We've been the No. One database in the IT ecosystem for a very long time - we think that's going to preserve that franchise and expand it," he said.

Q3 2024 in detail

Oracle reported $13.3bn in total revenue for the quarter, up 7 per cent year-over-year.

Cloud services and license support revenues were $10bn, up 11 per cent year-over-year ignoring foreign exchange.

Cloud license and on-premises license revenues were $1.3bn, down 3 per cent year-over-year.

The vendor's total remaining performance obligations (RPO) was a record $80bn, up 29 per cent. Oracle should recognise 43 per cent of that money as revenue over the next four quarters.

Operating income using generally accepted accounting principles (GAAP) was $3.8bn. Net income was $2.4bn.

Total cloud revenue for the quarter was $5.1bn, up 24 per cent year-over-year ignoring foreign exchange.

Oracle brought in $1.8bn in infrastructure-as-a-service (IaaS) revenue, an increase of 49 per cent year-over-year. Cloud application revenue was $3.3bn, up 14 per cent year-over-year.

Fusion Cloud ERP and NetSuiteCloud ERP each brought in $800m for the quarter. That is an 18 per cent increase year-over-year for Fusion and a 20 per cent increase for NetSuite ignoring foreign exchange.

Oracle traded at about $130 a share after hours, up about 14 per cent.

For fourth fiscal quarter guidance, Catz said she expects total revenue excluding Cerner should grow 6 to 8 per cent year-over-year.

Total cloud revenue excluding Cerner should grow from 22 to 24 per cent.