Oracle had an eventful week last week that included the release of its quarterly earnings, followed by some significant announcements in the area of multicloud capabilities and AI. While the company’s earnings slightly missed expectations, its other announcements drove the stock higher over the following days.

I’ll dig deeper into all of this Oracle news in the following sections and explore how Oracle has continued to shape its identity and differentiation in the cloud service provider space.

Earnings Delivered with Cloud — but Still a Near Miss

Financially, Oracle had a mixed quarter. Its revenue was $14.29 billion, or $260 million below the $14.55 billion expected. This resulted in non-GAAP earnings per share of $1.63, versus an expected $1.64. Oracle saw a 15% decline in licensing revenue for the quarter. However, its cloud business grew a robust 20%, fueled by an eye-popping 42% increase in its IaaS business. (SaaS saw a more modest 10% increase.)

For the 2024 fiscal year, which ended in May, the company generated $53 billion in revenue, a 6% increase over last year. On this $53 billion, the company recognized GAAP operating income of $15.4 billion—a 29% operating margin.

While it’s hard to attribute causality for the company’s decline in licensing, I suspect it is reflective of customers’ move to the cloud. I also expect that the gains the company is making in the cloud will more than offset these declines. Indeed, my big takeaway from Oracle’s earnings report is that the company is executing against its long-term strategy of focusing on multicloud and AI, and the market seems to recognize this even as its legacy business tails off.

Oracle Expands Multicloud Reach with Google Cloud

On the heels of its earnings release, Oracle announced a partnership with Google Cloud that furthers its multicloud strategy. As part of the agreement, Oracle is now offering direct interconnection with Google Cloud in 11 regions and will be deploying Oracle Cloud Infrastructure (OCI) in Google Cloud, delivering several database services to Google Cloud customers.

Crucially, OCI and Google have partnered to deliver a private, high-speed network between the two cloud environments. This interconnect delivers up to 50 gigabytes per second of bandwidth (and security) without any ingress and egress fees for organizations with applications in one cloud and data in the other.

The OCI services to be deployed in Google Cloud start with the Exadata Database Service—an Oracle-designed infrastructure platform built specifically for Oracle database environments. Residing on Exadata are Oracle’s Autonomous Database Service and Database Zero Data Loss Autonomous Recovery Service. The Exadata service, called Oracle Database@Google Cloud in its new context, builds on the company’s efforts to natively deliver its database service across all cloud service providers to provide native performance for an enterprise’s applications and data in those environments.

As more enterprises deploy hybrid cloud environments, locality is critical for application and data performance, security, and management. Deploying the database service that the vast majority of enterprise organizations use (i.e., Oracle’s) in the same cloud datacenter as these applications enables all of those benefits to be realized. This ultimately leads to lower complexity and lower cost for enterprise IT organizations.

Besides the offerings already mentioned, Oracle’s MySQL HeatWave, database migration tool GoldenGate, and security tool Data Safe will also run as native services in Google Cloud.

This is the second such partnership Oracle has built to establish real multicloud capabilities for the benefit of enterprise IT (The company announced a similar partnership for Microsoft Azure in September 2023). As I look at these partnerships, the winner is any enterprise organization that has long relied on Oracle Database and now has a mandate to move to the cloud. Because OCI deploys Database@ in partner datacenters and because these Oracle services can be consumed and managed from partner consoles, true multicloud is being delivered.

It’s worth noting that there is a lot of talk about multicloud these days, and too much of it is empty or infeasible. While most CSPs have promised to deliver multicloud, doing so is both onerous and expensive for enterprise organizations. Because of this, multicloud has not really worked in a practical sense. What Oracle is doing is tearing down these barriers and allowing the full potential of the multicloud promise to be realized. Ideally, this is the beginning of a trend where we will see all CSPs create these tighter integration points to serve the market better.

OpenAI Support Grows

Another significant piece of news from Oracle was about its support for OpenAI. As part of an agreement with Microsoft and OpenAI, the Azure AI platform will extend to OCI, delivering additional capacity as necessary. Per the agreement, OCI will make its infrastructure available for inference and other needs.

Much like its work on Database@Azure and Database@Google Cloud, Oracle seems intent on enabling AI in a true multicloud fashion. It creates these high-speed, low-latency interconnects to other cloud providers by deploying purpose-designed infrastructure in its own cloud environment, such as Exascale for database or OCI Supercluster for AI training. As touched on above, the company is doing this by removing the operational friction associated with multicloud. This includes employing a single console for acquiring, consuming, and managing these environments and resources.

Autonomous Database Comes to Azure

Finally, Oracle announced that its Autonomous Database has been natively deployed to Azure, on OCI hardware. Autonomous Database is what it sounds like: Oracle Database as an automated service. For organizations that want the power of Oracle Database, but lack the budget or technical resources to manage it, Autonomous Database is a wise decision. I see this as an attractive service for data-driven startups or software development organizations that want a powerful development environment without the headache of managing it.

Final Thoughts

As already mentioned, I am curious to see whether OCI is establishing a direction and pace that other CSPs will follow. If so, enterprise IT organizations will be the big winners in this new data-driven, multicloud world. If not, they will still benefit to the degree that they use Oracle alongside Azure or GCP. However, in this scenario OCI will win at the expense of its competitors.

Circling back to financials, it’s rare that a company misses on its earnings yet sees its stock increase in the following days. While Oracle’s miss wasn’t significant, it was a miss nonetheless. I note this to highlight the strength of Oracle’s cloud strategy and, more importantly, how it’s executing against that strategy. I don’t know that there can be any stronger validation for an executive team than when a forward-looking partnership announcement immediately undoes the damage of a financial miss.

I look forward to seeing how the company continues down this differentiated multicloud strategy. Will it find a willing partner in AWS? What about Aliyun (Alibaba Cloud) and other CSPs that are more regionally focused?

Finally, will other CSPs follow? Will we see an Azure-GCP partnership to enable multicloud? AWS with anybody? This is what enterprise customers crave, and I think such a move can create greater opportunity for the cloud providers, too. For now, we’ll have to wait and see how this shakes out—and how much Oracle takes advantage of its lead in this area.