Oracle Q1: CTO Ellison calls GenAI 'a boon' to database business
“You can’t build any of these AI models without enormous amounts of training data”
The growth of artificial intelligence and generative AI will benefit Oracle, co-founder and chief technology officer Larry Ellison told listeners on the vendor's latest quarterly earnings call.
Companies will seek their own specialised versions of GenAI programmes such as ChatGPT.
And to use one example of where Oracle can benefit, a vector database offering from the vendor will contain anonymised electronic health records and other specialised training data for health care companies, he said.
"You can't build any of these AI models without enormous amounts of training data," Ellison explained.
"If anything, what generative AI has shown is that the big issue about training one of these models is just getting this vast amount of data ingested into your GPU supercluster.
"It is a huge data problem, in the sense that you need so much data."
Oracle Q1 earnings
Ellison added: "We think it's a boon to our business. And we are now getting into the deep water of the information age.
"Nothing has changed about that. The demands on data are getting stronger and more important."
These remarks came during the US-based database and cloud products vendor's Q1 earnings call to report results for its first fiscal quarter.
Ellison said that AI is a recurring opportunity for Oracle as well, because companies will need to keep training models on new data.
Legal services will need to train models on new judgments and court cases.
Research firms will have to train on newly published studies.
"We're going to be very, very competitive across the board, whether it's training or inferencing," he added.
"We're pretty confident that we've got a cost performance advantage."
Still, despite the AI enthusiasm and growth across Oracle's cloud offerings, the vendor's stock tumbled after hours due to less revenue generated in the quarter than analysts expected.
Oracle reported $12.45bn for the quarter, $20m below expectations, according to CNBC.
Oracle's stock fell about nine per cent after hours Monday, trading at about $116 a share.
Currency, Cerner, datacentres
Oracle CEO Safra Catz put part of the blame for the vendor's revenue miss on currency exchange rates, electronic medical system provider subsidiary Cerner, and datacentre construction.
Catz said that Oracle "saw a modest currency tailwind" on the call.
She characterised Oracle's "biggest challenge" as "building datacentres as quickly as possible" to meet demand.
Oracle has 64 cloud regions live, plus 44 public cloud regions worldwide and another six being built, she explained.
Twelve of those public cloud regions interconnect with Microsoft Azure.
And Oracle has nine dedicated regions live and 11 more planned, plus nine security regions live.
The vendor is at work building "many, many more datacentres than any other cloud provider," Ellison said.
"We have performance advantages, we have security advantages, and that's why we're growing much faster than any of the other hyperscalers."
Regarding Cerner, as Oracle works to move the subsidiary to the cloud and change its business model to recurring revenue, that transition has resulted "in some near-term headwinds to the Cerner growth rate as customers move from licensed purchases - which are recognised upfront - to cloud subscriptions, which are recognised ratably."
"Excluding Cerner, I remain committed to accelerating our total revenue growth rate this fiscal year as well as maintaining our current high - the high cloud growth rates for the year," Catz said.
Oracle's executives on the call tried to quell concerns by pointing to business wins.
Ellison said that the nine utility companies owned by Warren Buffett's holding company Berkshire Hathaway are replacing existing enterprise resource planning (ERP) systems and standardising on Oracle Fusion Cloud applications.
Ellison estimated that Oracle has 95 per cent of the cloud ERP market for live customer use.
GenAI an Oracle cloud opportunity
AI development companies - including Elon Musk's xAI - have signed contracts to purchase more than $4bn of AI training capacity in Oracle's Gen2 Cloud, Ellison told listeners.
That's twice as much AI training as Oracle booked at the end of Oracle's fourth fiscal quarter.
Oracle's remote direct memory access (RDMA) interconnected Nvidia superclusters are a differentiator for the vendor.
They train AI models twice as fast at half the cost of other clouds, Ellison said, without naming competitors.
And they go beyond AI use cases, including the ability to build faster databases and achieve automation.
When it comes to training graphics processing units (GPUs), Ellison said that "in some cases, our prices for GPU training - which are very profitable, by the way, for us…our prices are lower than the cost of other hyperscalers doing the training."
Oracle is also making use of GenAI internally with its updating of subsidiary electronic health systems provider Cerner.
The vendor has used its application generator Apex to write code for the next version of Cerner.
"It's coming along very, very nicely," he said.
Oracle previews CloudWorld news, Microsoft expansion
During the call, Catz offered a preview for the news to come out of Oracle CloudWorld 2023.
Attendants can expect to see AI capabilities with Oracle Cloud Infrastructure (OCI) and updates to Oracle Autonomous Database.
Oracle will also detail its multi-cloud strategy and growth of Oracle Analytics throughout the portfolio to drive better decision making, Catz said.
The vendor will also show GenAI capabilities in Fusion, NetSuite and Oracle industry applications.
Ellison also teased a joint virtual press conference happening Thursday with Microsoft CEO Satya Nadella.
The two tech titans will discuss an expansion in the two vendors' partnership.
"In our upcoming announcement with Microsoft later this week, we will be substantially expanding our existing multi-cloud partnership with Microsoft by making it easier for Microsoft Azure customers to buy and use the latest Oracle Cloud database technology in combination with Microsoft as your cloud services," he said.
"Satya and I will discuss the details of our expanding partnership at Microsoft headquarters in Redmond on the 14th."
During the Oracle CloudWorld London this year, the tech giant left a big message to partners: "We didn't see you as 'as much of an asset as we should have - we're learning", Doug Smith global partner boss told CRN.
Oracle Q1 in detail
Total revenue during Oracle's first fiscal quarter was $12.5bn, up eight per cent year-over-year ignoring currency exchange.
Cloud services and license support revenue was $9.5bn, up 12 per cent year-over-year ignoring currency exchange.
Cloud license and on-premises license revenues dropped 11 per cent year over year to $800m.
Cloud revenue including infrastructure-as-a-service (IaaS) and software-as-a-service (SaaS) was $4.6bn, up 29 per cent year-over-year ignoring currency exchange.
SaaS represented most of that revenue, bringing in $3.1bn during the quarter, up 17 per cent year-over-year.
IaaS revenue came in at $1.5bn for the quarter, up 64 per cent ignoring currency exchange.
Fusion Cloud ERP brought in $800m during the quarter, up 20 per cent year-over-year.
NetSuite Cloud ERP brought in $700m, up 21 per cent year-over-year.
Operating income for the quarter was $3.3bn using generally accepted accounting principles (GAAP).
GAAP net income was $2.4bn. Operating cash flow was $7bn, up nine per cent year-over-year. Free cash flow was $5.7bn, up 21 per cent.
Catz told listeners the vendor signed "several" OCI deals greater than $1bn in total value.
Oracle's remaining performance obligation (RPO) was about $65bn in the quarter.
The portion excluding Cerner grew 11 per cent, she said.
About half of that RPO will get recognised as revenue over the next 12 months.
"Customer momentum is continuing to build," she added.
"This momentum is turning into bookings.
"And that gives me the confidence that our annual revenue growth will continue to accelerate moving forward."