The 'Oracle playbook' continues to drive cloud growth as Cerner business boosts Q3 revenue

Safra Catz

The Cerner effect seems to be kicking in at Oracle, contributing $1.5 billion to Q3 revenues of $12.4 billion, up 18% year-on-year. 

Cloud revenue was up 45% to $4.1 billion, while cloud services and license support revenues grew 17% to $8.9 billion. Cloud license and on-premise license revenues were flat at $1.3 billion. Net income was $1.896 billion. 

Earlier this month, Salesforce CEO Marc Benioff referred to “the Oracle playbook”, from which he said his firm was taking a lead. For Oracle CEO Safra Catz, that was something she flagged up in the post-earnings analyst call, albeit without actually naming Salesforce: 

Our cloud offerings drive operational efficiency. In fact, one of our competitors recently coined the term, 'the Oracle playbook', which I absolutely love, because the Oracle playbook is all about doing more while spending less...we started this ourselves over 20 years ago and have kept it up over all these years, resulting in the highest margins in the software business for decades. 

She added: 

The combination of Oracle's infrastructure and apps, which is unique in the cloud market, increases the intensity of business transformation. Cloud is no longer about just renting commodity white boxes. It's about velocity and value. We have become the enterprise technology vendor of choice because we have products and services that help our customers drive cost efficiencies and modernize their businesses.

As an exemplar, Catz cited Oracle’s recent announcement of a seven year tie-up with Uber, which is moving its critical workloads to Oracle Cloud Infrastructure (OCI):

The Uber win was notable because we have yet another example of an industry-transforming company concluding that Oracle's cloud, performance and security exceeds that of our competitors and at a price point that represents a sustainable long-term partnership. Uber will use more of our technology to drive value in their own business.

Healthcare

It was to Cerner that Chief Technology Officer Larry Ellison turned his attention, stating that since Oracle acquired the healthcare behemoth last June, around $5 billion of additional business has come in, citing customers such as the US Department of Defense, the US Department of Veterans Affairs (VA) and health groups in the UK, Canada and the Middle East:

The VA deployed our unified Electronic Health Record (EHR) system to 19 additional sites. The Department of Defense deployed Oracle Cerner EHR to all the OCONUS (Outside Continental US) locations in the the US Department of Defense. In the UK, at the National Health Service (NHS), Sheffield Teaching Hospital deployed the full suite of Cerner applications across three additional sites and the Sheffield Teaching Hospitals. The Princess Alexandra Hospital, also in the NHS, is a 430-bed hospital that added the full Cerner suite. Mubadala Health was the first Cerner Millennium client to move from the Cerner data center directly now to the OCI Cloud.

There’s much more to come, he pledged: 

While the Cerner business has been booking billions of dollars in Millennium clinical and Electronic Health Record systems for hundreds of hospitals and ambulatory clinics, the overall Oracle Healthcare application portfolio is actually much broader, covering virtually the entire healthcare ecosystem. Hospitals are also buying the Oracle Fusion ERP system to manage their revenue cycle and reimbursements from insurance companies to patient billing, plus their medical supply chain from ordering to inventory. Hospitals are buying Fusion HCM to manage their complex high-value workforce of doctors, nurses and technicians. Pharmaceutical companies are buying Oracle Clinical One to manage clinical trials. Government health organizations, public health organizations are using aggregated EHR data to monitor infectious disease and respond to outbreaks quickly and efficiently.

As well as its healthcare ambitions, Ellison has previously cited the telco space as being a prime focus for Oracle. There are successes there, he said, citing Vodafone as a case in point: 

We're actually creating dedicated data centers for Vodafone. I'm not sure how many we've already built as yet. But, if you will, Vodafone is moving a substantial part of their business into the Oracle Cloud. And again, we have this ability to build data centers for customers. Those data centers are OCI data centers that we run for them, but they are dedicated to workloads at a particular customer…In our constellation of data centers, they look like all the other OCI data centers. They're automated like all the other OCI data centers. So we take advantage of those economies of scale and that skilled labor that runs them. A lot of it is AI, but a lot of it we still have human beings. We've done that for Vodafone. 

He repeated his argument that telcos represent a major growth opportunity for Oracle, along with financial services:

We've always been very strong in telcos, and now they're beginning to move to the cloud. We're seeing some major commitments from some of our largest customers around the world. We're also seeing financial services companies take a slightly different point of view, but where they want to keep things, if you will, on-premise. But since we can build an OCI region and dedicate it to a bank, there we're doing more.. Nomura was an example, Nomura in Japan, but there are other examples. We build these clouds for banks.

So I mean, huge industries [are] moving to the cloud in a slightly different way than other industries, not moving to public cloud, but rather preferring to have these dedicated regions. So it's just their application, just their applications in this cloud. We have the ability to do that. Again, the Amazon does not, and Microsoft does not, and Google does not.

My take

Wall Street was actually rather cool on Oracle on the back of the Q3 numbers, despite the revenue rise and all indications that the ‘Oracle playbook’ continues to deliver growth. Catz was upbeat about pent-up demand coming through in Q4: 

We have dropped a large number of data centers and as they become available, we have customers waiting to get started and use them. So, we have commitments from customers to quite an enormous amount of consumption. They’ve basically been waiting for us. It's taken a while in all these different countries to open these data centers and to make them available to our customers. And so we know they are actually very impatient to use the capacity as it becomes available. We just have a lot of momentum and a lot of commitment from our customers and a lot of enthusiasm around our offerings. That's how the math works.

Onwards!