Microsoft extends Azure into Oracle cloud to satisfy OpenAI

Big Red has also cuddled up to Google's cloud and made the transition to high-growth off-prem business

Oracle has revealed its cloud will be used by Microsoft to run workloads for OpenAI.

Big Red described the deal as meaning Redmond will extend the Azure Al platform to Oracle Cloud Infrastructure (OCI) to provide additional capacity for OpenAl.

The latter outfit's CEO Sam Altman provided a canned quote to the effect that "OCI will extend Azure's platform and enable OpenAI to continue to scale" – which sounds a lot like Azure can't sate Open AI's lust for GPUs

On Oracle's Q4 2024 earnings call – staged the same day as the OpenAI news was revealed – chair and CTO Larry Ellison told investors Big Red is building what he described as "a very, very, you know, large datacenter, very big," about half of which will be used by Microsoft.

"Lots of Nvidia chips, the new Nvidia chips, the new Nvidia interconnect; liquid-cooled; and they're primarily for training. I mean, not inferencing. It's for doing masses and masses of training," he, you know, said.

Also on Tuesday, Oracle also announced that it's hooked up with Google, making the ad giant's Cross-Cloud Interconnect service available in 11 OCI regions. Databases are never far from Oracle's thoughts, and Oracle Database@Google Cloud has been promised for a debut later in 2024.

Oracle's Q4 2024 saw $14.3 billion come through the door in the quarter – up three percent year on year. Cloud services and license support revenues rose nine percent to deliver $10.2 billion of revenue.

CEO Safra Ada Catz revealed the quarter saw Oracle sign "the largest sales contracts in our history, led by huge demand for training large language models, as well as record levels of sales for OCI, Autonomous, Fusion, and NetSuite."

"As you know, Oracle's Q4 is known for customers purchasing large software license contracts to power their businesses," she added – a nod to the software giant's annual end-of-year sales push. This year, Catz said, buyers also spent up big "because of the pivot to the cloud, this Q4 was powered by the enormous demand for our cloud services, and they showed up remaining performance obligations (RPO)."

Customers are "trading one-time non-recurring license revenue in return for much bigger strategic customer commitments for multi-year cloud revenue," she added, declaring "This is exactly what we've been targeting, and it bolsters my confidence that our overall revenue, earnings, and cash flow performance, as well as our growth rates, will only get stronger and accelerate."

Oracle now has $98 billion of RPO on its books.

Catz described the quarterly result as representing an "incredible quarter" and "the full emergence of our high-growth cloud businesses."

Full year revenue of $53 billion represented six percent annual growth, but Catz tipped that number to accelerate and predicted "infrastructure services to grow faster than the 50 percent we reported this year."

Q1 will kick off the party, with the CEO predicting six to eight percent year-over-year revenue growth.

Ellison opined that Oracle has lots of room to grow because "This AI race is going to go on for a long time."

"It's not a matter of getting ahead … you also have to keep your model current, and that's going to take larger and larger datacenters. And some of the datacenters we have that we're planning are actually even bigger.”

"Some are getting very close to, dare I say it, a gigawatt, which is a pretty good-sized city or one enormous AI cloud training datacenter," he observed.

Oracle, he claimed, can build such datacenters. Or small ones that fit into a submarine.

Big Red's investors blew the ballast tanks and sent the share price from around $123 before the results announcement to around $135 in after the bell trading. ®

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