Oracle's HeatWave comes to AWS, as Ellison vows "shock" poaching of AWS customers
Gross margin for cloud services and license support was 81%...
A bullish Oracle reported revenues of $11.4 billion for the quarter ending August 2022 (its fiscal Q1, 2023), saying new customers of its Oracle Cloud Infrastructure (OCI) included NVIDIA, Puma, Qatar Airways Group and the State Treasury of Finland. Oracle boosted quarterly capex to $1.7 billion as it built out cloud infrastructure.
The earnings outperformed analyst expectations, although shares fell on the news as the company took a hit from a strong doller. We listened in on the earnings call. Here are six takeaways from Oracle’s fiscal Q1.
1: Holy margin!
Oracle said its gross margin for cloud services and license support was a lip-smacking 81%.
Overall operating margin including new acquisition Cerner, a healthcare software firm it bought for $28 billion in a deal that closed in June 2022, was 39%: “Lower than in the past, since we only just began to integrate Cerner” said CFO Safra Katz; Oracle expects that figure to improve as the integration of the company continues.
2: MySQL Heatwave comes to AWS as a “native AWS experience”
Oracle last quarter unveiled a high-speed interconnect with Azure that let’s Azure customers running their applications in Microsoft’s cloud use Oracle’s cloud database. It’s taken a little longer than first touted but Oracle’s Heatwave engine, which accelerates MySQL performance, has now come to AWS.
Oracle introduced HeatWave in May 2021. It lets users run Online Transaction Processing (OLTP) and Online Analytical Processing (OLAP) workloads directly from MySQL databases. The big idea, in brief: Avoid sometimes torturous ETL procedures to get transactional data into another database for analytics and capture users wanting a single tool for transaction processing and query processing in MySQL — winning workloads that might otherwise be split across multiple relational databases and/or cloud data warehouses.
See our earlier detailed analysis of MySQL Heatwave
“AWS users can now run transaction processing, analytics, and machine learning workloads in one service, without requiring time-consuming ETL duplication between separate databases such as Amazon Aurora for transaction processing and Amazon Redshift or Snowflake on AWS for analytics and SageMaker for machine learning” Oracle said, adding in a press release this week that “MySQL HeatWave on AWS will deliver “a true native experience for AWS customers through millisecond-level latencies for applications and a rich interactive console. It facilitates schema and data management, and executes queries interactively from the console…”
“Many of our MySQL HeatWave customers… wish to continue running parts of their application on AWS.
“Those customers face serious challenges including exorbitant data egress fees charged by AWS and higher latency when accessing a database service running in Oracle’s cloud,” said Edward Screven, chief corporate architect, Oracle – adding that offering MySQL HeatWave on AWS would allow customers to use it without moving their data off AWS and. “We wanted to offer AWS customers this choice to benefit from MySQL HeatWave innovation without moving their data from AWS and incurring those data egress fees.
3: AWS remains the bête noire
AWS delighted in 2019 in reporting that its consumer business had turned off its final Oracle database, after migrating a 75PB of internal data stored on nearly 7,500 Oracle databases to a range of its own AWS services, saying it had reduced its database costs by over 60%, the speed of its consumer-facing applications by 40% percent, and reduced database administration overheads by 70% as a result of switching to AWS services.
That’s all part of a long-running bit of public nose-tweaking between the two companies. Oracle founder Larry Ellison loses no opportunity to take a jab at AWS and the call was no exception. He said: “Personally, I have been talking to some of Amazon's most famous brands that are running at AWS. And the AWS bill is getting very large, and they can save a huge amount of money by moving to OCI. We expect next quarter, we'll be announcing some brands and companies moving off of Amazon to OCI that will shock you.”
Chile’s largest telco, Entel, “is now moving all of their critical workloads from AWS to OCI” he added.
(Ellison is not averse to a touch of exaggeration and The Stack has contacted Entel to confirm this…)
4: The dollar is a mighty headwind
Oracle’s revenues beat analyst expectations but its shares fell as a strong dollar hit profits. Q1 operating income (GAAP) was $2.6 billion, down 23%. Executives struck a positive note regardless. ORacle CFO Safra Katz said: “Total cloud revenue – that’s SaaS and IaaS including Cerner [Ed: a health technology company bought by Oracle for $28 billion; the deal closed in June 2022] – was $3.6 billion, up 45% in USD and up 50% in constant currency. with IaaS revenu a smidge under $900 million and SaaS revenue at $2.7 billion. Total cloud services and license support revenue for the quarter was $8.4 billion, up 20% in constant currency” she added.
5: Sales growth boosted by field engineering investment
The growth of OCI (Oracle said it added 1,000 customers during the quarter) has been turbocharged by investment in “a lot more engineering talent in the field to help our customers bring over workloads” Katz said, adding that Oracle was “priming the pump” on cloud migrations “by sending engineers, field engineers who can help the customers move those workloads” (whether from on-premises or from other cloud providers.)
6: Cerner acquisition
With the Cerner acquisition having closed over the summer, Oracle is busy building out new products for the medical software firm. It took the opportunity to tout its own Apex low code development platform on the earnings call, with Ellison telling analysts: “We expect to have our first pretty complete new Cerner health management product out within 12 months… Our new generation of application development tools is going to enable us to modernize the Cerner technology at a rate that would be inconceivable a couple of years ago.”
