Oracle’s effort to reposition itself as a cloud platform that can compete with the hyperscale providers has hit a bump in the road, with revenue growth in its cloud unit dropping for a second successive quarter. While founder Larry Ellison remains bullish about its prospects, the news saw the company’s share price tumble 8%.
Traditionally a provider of on-premises database services, Oracle has been focusing on its cloud offering in recent years, building out a hybrid portfolio of virtual and physical infrastructure. But it holds just a 2% share of a public cloud market that is dominated by the hyperscale trio: Amazon’s AWS, Microsoft Azure and Google Cloud.
Oracle’s overall revenue grew 5% in the quarter, to $12.94bn.
Oracle’s cloud growth slows
Its results for the three months to the end of November show that cloud revenue was up 25% year-on-year, to $4.8bn. While on the face of it this looks positive for the vendor, the last quarter saw cloud revenue grow 31%, and in the prior period, growth was 54%.
Dragging this down was Oracle’s revenue from cloud services and licence support, which was $9.64bn, up 12% but below analyst expectations. Earnings from cloud and on-premises licenses fell 18% to $1.18bn.
Cloud providers across the board have been experiencing a decline in revenue growth as a result of constraints on IT budgets, many of which have returned to pre-pandemic levels.
Oracle has also run into difficulties obtaining in-demand Nvidia GPUs, which are used for training and running AI models and services, to build out its AI offering. The company’s CEO Safra Catz told investors on its earning call that Oracle “did not bring up as much capacity as we could have used this past quarter” because of difficulties getting hold of hardware.
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Other vendors have reported similar issues, with Dell advising clients earlier this month that that they would have to wait up to 39 weeks to receive orders of AI-ready servers due to the length of time it takes to obtain GPUs.
Ellison optimistic about cloud infrastructure
Oracle can point to strong growth in its cloud infrastructure (OCI) business as a cause for optimism, where revenue was up 52%, to $1.6bn. Ellison, the company’s chair and CTO, said he anticipates similar growth rates for the business to continue. “I expect the OCI growth rate to be over 50% for a few years,” he told investors.
As reported by Tech Monitor, last month it was revealed Microsoft is renting servers from Oracle to power its Bing AI search portal. The companies have been working together closely in recent months, and in September struck an agreement which will see Oracle database services available on Microsoft’s Azure cloud platform.
Elsewhere, Oracle is providing cloud servers to Elon Musk’s AI venture, xAI, and tech giant Samsung.
Despite the GPU supply problems, Ellison said it will continue to invest in infrastructure. “Oracle is in the process of expanding 66 of our existing cloud datacentres—and building 100 new cloud datacentres—to meet growing demand,” he said.
“We can build our new data centres very rapidly and operate them inexpensively because they are all highly automated.”
