- “If you run faster and pay by the hour, you cost less.” That’s according to Oracle chairman and chief technology officer Larry Ellison, who spoke with analysts on Monday following a market rout. Oracle, which is part of the momentous $500 billion Stargate project, was included because it has a major advantage over its competitors, Ellison said.
Oracle CEO Safra Catz said demand for the information technology firm’s cloud services is locked in, with customers seeking larger and longer contracts, although she warned of some “lumpiness” ahead. Catz spoke with analysts on Monday following Oracle’s release of its quarterly earnings.
The announcement came amid a bloodbath in the stock market turbocharged by losses associated with tech and AI. The Nasdaq Composite tumbled 4% to its worst day since September 2022. Oracle’s stock was down more than 4% on Monday.
Still, Catz and chairman and chief technology officer Larry Ellison were upbeat, particularly in regard to future contracts. Remaining performance obligations (RPO) essentially show the value of signed contracts Oracle has in place to deliver services in the future. Oracle’s RPO grew 63% to $130 billion, the company reported this week. Catz said the figure would likely translate into 15% revenue growth in the next fiscal year. Those future contracts don’t include Stargate, a massive $500 billion project SoftBank CEO Masayoshi Son is chairing in partnership with OpenAI, Oracle, Nvidia, and Microsoft.
According to Ellison, Oracle’s secret sauce in the project is “very simple.” Oracle can build huge AI clusters with technology that runs more quickly and at a lower cost than its competitors.
“If you run faster and you pay by the hour, you cost less,” Ellison said on Monday. “So that technology advantage translates to an economic advantage, which allows us to win a lot of these huge deals.”
Stargate is expected to serve as a key piece to the future of Oracle; Ellison said it looks to be the “biggest AI training project out there.”
“And we expect that will allow us to grow our RPO even higher in the coming quarters,” said Ellison. “And we do expect our first large Stargate contract fairly soon.”
Catz told analysts there would be some ups and downs in RPO ahead, but she expected “extremely significant numbers” in the next few months.
“Remember, our remaining performance obligation, we also burned down some of it through the quarter as capacity goes online, but I expect that number to be extremely large,” said Catz. “This is enormous, but I expect it actually to continue to be very large.”
Overall, Oracle missed Wall Street’s expectations, posting revenues of $14.13 billion versus $14.38 billion, and earnings per share of $1.47 versus $1.49. Still, both Catz and Ellison were rosy about the revenue potential.
“We now have a clear line of sight to our future revenue growth,” said Catz.
