Oracle’s cloud business bucked an optimization trend that slowed revenue growth among hyperscalers in the last several quarters, according to a quarterly earnings report Monday.
The company’s cloud revenue, inclusive of its Oracle Cloud Infrastructure and SaaS segments, grew 55% year over year during the three-month period ending May 31, reaching $4.4 billion. The OCI segment alone grew by 77% year over year, the company said.
“While competitors have seen their growth rates drop precipitously over the last year, our cloud infrastructure growth rate has essentially doubled from last year,” the company’s CEO Safra Catz said during a Monday earnings call.
Oracle is a relatively small player in a massive cloud market dominated by three big players, AWS, Microsoft and Google Cloud. Together, the hyperscalers account for roughly two-thirds of global spending on cloud infrastructure.
The company's OCI revenue, while growing at a healthy rate year over year, represents only a fraction of the $63 billion spent on cloud infrastructure globally in the first three months of the year, based on Synergy Research Group’s April market analysis.
Oracle’s modest slice of that massive and growing pie was 2% in Q1, John Dinsdale, chief analyst at Synergy Research Group, said in an email. That’s slightly less than Alibaba’s 4% share and the 3% share IBM and Salesforce each held.
By comparison, Google Cloud, the smallest hyperscaler, controlled 10% of the market, trailing Microsoft and AWS at 23% and 32% respectively.
“Oracle’s growth numbers are finally heading in the right direction, but it could be 10 times bigger and it would still be lagging behind the market leaders,” Dinsdale said.
From industry verticals to AI
Oracle has been using its relatively smaller size to its advantage, according to Catz.
“Our investment strategy for adding capacity remains to build many, many identical cloud regions,” Catz said during the earnings call. “Our starting point is smaller, which allows us to go where competitors cannot, and this continues to be an advantage for us.”
In December, the company’s cloud profile got a boost when the U.S. Department of Defense put Oracle, along with AWS, Microsoft and Google Cloud, on a list of providers greenlit for $9 billion in Joint Warfighting Cloud Capability contracts.
The company has chalked up multiple wins with industry verticals for high tech, healthcare, financial services, retail, hospitality and other industries with specific IT demands, as well as with data sovereignty solutions for government.
In May, Oracle cemented a deal with Prada Group, which is adopting two Oracle retail cloud solutions and Wyndham Hotels & Resorts, which will migrate 2,000 properties to Oracle’s hospitality and property management cloud by the end of next year.
A seven-year strategic partnership with Uber announced in February elevated Oracle’s standing in the industry, Sid Nag, VP analyst at consulting firm Gartner, said in an email.
“Oracle is out-innovating the market with respect to emerging enterprise needs such as sovereign clouds,” Nag added.
Oracle is also banking on the generative AI boom to fuel near-term growth.
The company expanded a multiyear partnership with Nvidia in October and, on Monday, announced plans to collaborate with enterprise AI platform Cohere on end-to-end business process automation solutions.
The partnership has already shown promise, according to Larry Ellison, Oracle’s chairman and CTO.
“We used our own private data to improve and extend the training of existing Cohere large language models,” Ellison said during the earnings call. “This supplementary training resulted in two new specialized large language models, one for medical professionals and one for first responders.”
