Dive Brief:
- Oracle promised massive cloud data-center buildouts to accommodate enterprise migrations, AI workloads and sovereign solutions Monday during a Q2 2024 earnings call.
- The company intends to expand capacity at 66 existing data centers and build 100 more, including 20 connected to Azure infrastructure, Chairman and CTO Larry Ellison said. Ellison did not provide a timeline, but said the company had "billions of dollars more in contracted demand than we currently can supply.”
- "We're building our own public regions based on direct customer demand, and then we're building partner regions like the 20 data centers for Microsoft," Ellison said during the call. "The combination of the two adds up to 100."
Dive Insight:
Data-hungry large language model training has already consumed much of Oracle’s available high-intensity compute.
“Demand for our cloud infrastructure and generative AI services is increasing at an astronomical rate," CEO Safra Catz said in an earnings report for the three-month period ending Nov. 30. Cloud revenue, including infrastructure and software services, grew 24% year over year, reaching $4.8 billion, with infrastructure accounting for $1.6 billion, a 50% year-over-year increase.
AI development companies had requisitioned more than $4 billion of the company’s Gen 2 Cloud capacity, Ellison said in a September earnings report for the previous quarter. At the time, the company had 64 active cloud regions globally and six more under construction.
The company supplied Elon Musk’s xAI with the Nvidia processors to train its Grok model, Ellison said Monday, and then received requests for more.
“Boy, did they want a lot more, a lot more GPUs than we gave them,” said Ellison, “and we’re in the process of getting them more.”
GPU infrastructure isn’t cheap. Oracle's capital expenditures reached $1.1 billion as the company expanded booking capacity. Oracle expects capital expenditures will reach roughly $8 billion before the fiscal year ends on May 31.
The investment is driven by more than AI enthusiasm.
“The demand for cloud infrastructure services and new Oracle cloud data centers is broad-based,” Ellison said, pointing to demand from nation states for sovereign cloud, and from banks, telecom providers and industrial companies for dedicated data centers.
Ellison also highlighted the role of multicloud partnerships in Oracle’s expansion plans.
Oracle will activate the 20 Azure data centers in the next few months, according to Ellison. Currently, 12 Oracle regions are connected to Microsoft’s public cloud.
“Customers don’t want clouds to be walled gardens,” he said.
An upstart competitor in a hyperscaler ecosphere dominated by AWS, Microsoft and Google Cloud, the company is now leaning on enterprise data migrations and AI compute to stoke its cloud business.
“As on-premise databases migrate to the cloud, we expect cloud database services will be the third leg of revenue growth,” alongside software and infrastructure services, Catz said.
“The only limiting factor is our ability to get the data centers handed over and filled up fast enough,” Catz added.
