Big Question for Oracle Cloud + AI Business: How High Can It Go?

In today's Cloud Wars Minute, I review Oracle's Q1 cloud revenue and how its business model innovation could propel the growth rate to rise even higher.

Highlights

00:54 — Oracle reported Q1 cloud revenue of $11.6 billion, which is up 62%. $7.4 billion came from cloud infrastructure, with OCI having a growth rate of 121%. Oracle's RPO (remaining performance obligation), or its backlog that hasn't been recognized as revenue yet, jumped 46% to $664 billion. So, there's this enormous backlog waiting to be converted to revenue.

01:41 — Over the last several quarters, the OCI growth rate has been steadily, and often dramatically, rising. While it's already at 121%, I think this is going to go up more as this giant RPO number gets kicked over to revenue.

02:10 — It's not just the technology propelling this, but the business model innovation. Oracle CEO Clay McGuirk mentioned three ideas during the earnings call:

• Suppliers are willing to defer payment that Oracle has to make to those suppliers until Oracle customers have begun to pay for the delivery of their data center services.
• Customers are supplying some of the hardware, reducing the outlay that Oracle has to make up front.
• Customers pay in advance: From startups to big established companies, customers are putting together big pools of money and are willing to pay in advance for the services they want.

03:42 — Hyperscalers need to determine how to get these services that everybody wants and is willing to pay a lot of money for into the hands of customers in ways that don't just require blunt-force spending by vendors.

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