As the timeline was getting overtaken by the massive price spike of Oracle stock this week, the obvious question seemed to grip everybody: Why is the market "suddenly" doing a price discovery based on a quarterly earnings report that, well, missed both earnings and profit estimates? And does this suddenly change the perception of the company from a tech sales perspective?

The key takeaway

For tech sales: If you needed any proof that the bottom of the stack is where the majority of the value from the first wave of AI will be captured, look no further than Oracle. 2025 saw the primary thesis around Oracle Cloud Infrastructure come to fruition, as the $300B OpenAI deal represents almost double the software revenue over the last 5 years. The problem with Oracle is that you, specifically, will never get to work on an account like this if you join them, but you can try and replicate some key plays in a different company. The infrastructure focus of OCI has elevated conversations that Oracle was previously involved in from IT to the C-Suite. The other key lesson is that customers are clearly willing to invest in AI + data + process outcomes, something that your company needs to offer in order to play in the big leagues.

For investors: For those that had an Oracle allocation, congrats. For the rest, it's probably best to focus on something else with less backlog quality risk. The big deal behind the stock jump is mostly driven by the current AI training bottleneck. If capacity catches up with demand over the next few years, the pricing advantage that OCI has today will likely be gone and they'll have to compete on product quality, which let's be honest, they don't have on the software side. The deal itself also has a significant conversion lag (contracted capacity → data-center readiness; readiness → customer acceptance, acceptance → steady-state consumption). So if your thesis relies on Oracle recognizing this revenue and you don't have insider knowledge around the contractual terms, odds are that you'll get caught holding the bag. The exception would be OCI splitting into a new company, but that's a low probability event on a short time horizon.

Oracle Cloud Infrastructure is here to save the day

Safra Katz: Clearly, we had an amazing start to the year because Oracle has become the go-to place for AI workloads. We have signed significant cloud contracts with the who's who of AI, including OpenAI, xAI, Meta, NVIDIA, AMD, and many others. At the end of Q1, remaining performance obligations or RPO now top $455 billion. This is up 359% from last year and up $317 billion from Q4. Our cloud RPO grew nearly 500% on top of 83% growth last year.
Now to the results. Using constant currency growth rates, as you can see, we've made some changes to the face of our income statement to better reflect how we manage the business and so you can understand our cloud business dynamics more directly. So here it goes. Total cloud revenue, that's both apps and infrastructure, was up 27% to $7.2 billion. Cloud infrastructure revenue was $3.3 billion, up 54% on top of the 46% growth reported in Q1 last year. OCI consumption revenue was up 57% and demand continues to dramatically outstrip supply. Cloud database services, which were up 32%, now have annualized revenues of nearly $2.8 billion. Autonomous Database revenue was up 43% on top of the 26% growth reported in Q1 last year. Multi-cloud database revenue, where Oracle regions are embedded in AWS, Azure, and GCP, grew 1529% in Q1. Cloud application revenue was $3.8 billion, up 10%, while our strategic back-office application revenue was $2.4 billion, up 16%. Total software revenue for the quarter was $5.7 billion, down 2%.
So all in, total revenues for the quarter were $14.9 billion, up 11% from last year and higher than the 8% growth reported in 17% to $6.2 billion. We have also been on an accelerated journey to adopt AI internally to run more efficiently.

Basically everybody was shocked by the performance obligations jump i.e. they signed a $300B contract over five years with OpenAI to build out data centers and will get paid over time to deliver it.

Lawrence Ellison: Eventually, AI will change everything. But right now, AI is fundamentally transforming Oracle and the rest of the computer industry. Though not everyone fully grasped the magnitude of the tsunami that is approaching. Look at our quarterly numbers. Some things are undeniably evident. Several world-class AI companies have chosen Oracle to build large-scale GPU-centric data centers to train their AI models. That's because Oracle builds gigawatt-scale data centers that are faster and more cost-efficient at training AI models than anyone else in the world. Training AI models is a gigantic multi-billion dollar market. It's hard to conceive of a technology market as large as that one.
But if you look close, you can find one that's even larger. It's the market for AI inferencing. Millions of customers using those AI models to run businesses and governments. In fact, the AI inferencing market will be much, much larger than the AI training market. AI inferencing will be used to run robotic factories, robotic cars, robotic greenhouses, biomolecular simulations for drug design, interpreting medical diagnostic images and laboratory results, automating laboratories, placing bets in financial markets, automating legal processes, automating financial processes, automating sales processes. AI is going to write, that is, generate, the computer programs called AI agents that will automate your sales and marketing processes.
Let me repeat that. AI is going to automatically write the computer programs that will then automate your sales processes and your legal processes and everything else and your factories and so on. Think about it. AI inferencing. It's AI inferencing that will change everything. Oracle is aggressively pursuing the AI market. And we're not doing badly in the AI training market, by the way. The difference seems bigger. Oracle is aggressively pursuing the inferencing market as well as the AI training market. We think we are in a pretty good position to be a winner in the inferencing market because Oracle is by far the world's largest custodian of high-value private enterprise data.
With the introduction of our new AI database, we added a very important new way for you to store your data in our database. You can vectorize it. And by vectorizing it, by vectorizing all your data, all your data can be understood by AI models. Then we made it very easy for our customers to directly connect all their databases, all their new Oracle AI databases, and cloud storage OCI cloud storage, to the world's most advanced AI reasoning models. ChatGPT, Gemini, Grok, Lama, all of which are uniquely available in the Oracle Cloud. After you vectorize your data and link it to an LLM, the LLM of your choice, you can then ask any question you can think of. For example, how will the latest tariffs impact next quarter's revenue and profit? You ask that question. The large language model will then apply advanced reasoning to the combination of your private enterprise data plus publicly available data. You get answers to important questions without ever compromising the safety and security of your private data.
Again, I'd like you to think about this for a moment. A lot of companies are saying we're big into AI because we're writing agents. Well, guess what? We're writing a bunch of agents too. But when they introduced ChatGPT almost three years ago, what you've got to do is have a conversation and ask questions. You weren't automating some process with an agent. You could ask whatever question you wanted to ask and get a well-reasoned answer with all of the latest and best information and high-quality reasoning to go along with it. Who's offering that to customers? We'll be the first. When we deliberate and demonstrate it at AI World next month.
That's what our customers have been asking for ever since the introduction of ChatGPT 3.5, almost three years ago. I wanted to ask questions about anything. And, therefore, you need to understand my enterprise data as well as all the publicly available data. Then you can answer the questions that are most important to me. Well, now they can ask those questions.

Now, technically Larry is not saying anything new here that readers of this newsletter are not familiar with. Still, an 81-year-old corpo dinosaur is betting the full company on delivering massive amounts of training and inference capacity. That's either the biggest top signal of all time or should show how obvious the future looks to even folks who are unlikely to see out the full transformation of computing.

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Derrick Wood: I'll echo my congratulations on this momentous quarter. Safra, the fact that you delivered over $300 billion of new RPO in Q1, just really amazing to see it's going to require a lot of infrastructure build-out. So could you provide a bit more context on how much CapEx and operational cost structure will be needed to fully service these contracts, how we should think about the ramp of these costs relative to the ramp in revenue over the next few years, and generally, how investors should be thinking about the ROI on the spend?
Safra Catz So first of all, as I mentioned in the prepared remarks and as I've said very clearly beforehand, we do not own the property. We do not own the buildings. What we do own and what we engineer is the equipment, and that's equipment that is optimized for the Oracle Cloud. It has extremely special networking capabilities. It has technical capabilities from Larry and his team that allows us to run these workloads much, much faster. And as a result, it's much cheaper than our competitors. And depending on the workload.
Now because of that, what we do is we put in that equipment only when it's time, and, usually, very quickly assuming that our customer accepts it, we're already generating revenue. Right away. The faster they accept the system and that it meets their needs, the faster they start using it. The sooner we have revenue. This is, in some ways, I don't want to call it asset light, from the finance world, but it's assets pretty light. And that is really an advantage for us. I know some of our competitors, they like to own buildings. That's not really our specialty. Our specialty is the unique technology, the unique networking, the storage, the just the whole way we put these systems together. And by the way, they are identical, and very simplified and, again, making it possible for us to be very profitable while still being able to offer our customers an incredibly compelling price.
What I have indicated is that CapEx looks like it's going to be about $35 billion for this fiscal year. But because we're monitoring this, we're literally putting it in right when we take possession, and then handing it over to generate revenue right away. So we have a very good line of sight for our capabilities to put this out and to just spend on that CapEx right before it starts generating revenue. But at this point, I'm looking at $35 billion for the year. And I think, I mean, it could be a little higher, but I think and if it is higher, it's good news.
Because it means more capacity has been handed to me in terms of floor space. And as you also know, we are embedded in our competitors' clouds, again, all we are responsible for to pay for is in fact our equipment, and that goes right away. And there, we're moving ultimately to 71 data centers embedded in our competitors or flash partners.

This is probably the most interesting point out of this - the reason why Oracle is winning those contracts is because it's able to provide a working server infrastructure at barebones pricing vs. the other hyperscalers. This is quite important to OpenAI because unlike Musk and xAI, they lack both the desire and capability to quickly execute new data center buildouts by themselves. While they can always raise more money and try to do it, a more obvious play is to let Oracle deliver the project. It also helps that this is done between US companies, rather than having to go and try their luck with the legal, political and technical drama of trying to do it with Alibaba.

Lawrence Ellison: I mean, I think everyone says they want to use AI. I mean, every I mean, CEOs, they don't want to use AI. Heads of state, heads of government say they want to use AI. We've never had consumers like that. I mean, we nor historically, we don't deal with CEOs. Now we deal with CEOs. Now we deal with heads of government and heads of state. On this because AI is so important. And letting people have you know, use AI on top of their data. That is what they want to do. But they didn't know how to do it securely. They didn't know how to well, they didn't know how to do it, period. And then one of the big risks was, oh my god. I can't share my JPMorgan Chase can't share all of its data. Goldman Sachs can't share all of its data with OpenAI. They won't do it. So or XAI or LAMA or, you know, Meta. They won't it's got to keep it private. So we've got to keep your private data private.
We've got to keep your private data secure. But we have to make it available for inferencing by the latest and best reasoning models from OpenAI and XAI and everyone else. And because we have the database, because we can vectorize all the data in the database, because we have very elaborate security models in our database, in the Oracle database, we can do all that. We can deliver all that. And then what we chose to do was to with the AI database was not only make sure we can vectorize all the data so it can be understood by the AI model, we then bundled it with all of the AI models. That's why we did a deal with Google. That's why we did all of these deals where, you know, Gemini you can get Gemini from the Oracle Cloud. You can get from the Oracle Cloud. You can get from the Oracle Cloud. You get Walmart from the Oracle Cloud. I could go on. So we bundled them together.
So it's very easy for our customers to use these large language models on a combination. And that's what they want is a combination of all of the publicly available data and all of their enterprise data. Which allows them to ask and get answered any question they can think of, any question that's important to them. Everyone wants it. I think the demand is going to be insatiable. But we can deliver a lot of databases and a lot of AI across our cloud over the next several years. We're in a good position to do that.

The launch of the Oracle vector database is an important move, as they already saw significant success in expanding their Oracle Cloud database services. Based on industry research, it appears to be a strong performer for enterprise data lakes. It's unlikely it will capture any developer adoption for other use cases, but it's an easy upsell for deeply entrenched Oracle customers. Let's dig deeper into OCI based on the last analyst meeting late last year.

Source: Oracle Financial Analyst Meeting 2024

OCI is growing very quickly. Based on which key metric you want to look at, if you think about revenue growth up more than 50% year over year, in terms of customer facing regions. And the reason customer facing regions is important, just so you're understanding, is we don't build regions unless people want them. I've tried asking Safra if she'll let me just build regions that don't have demand. You don't want to hear her response.
But the fact that we are growing the region footprint this quickly is a very different way of looking at our business. The fact that data center capacity is growing at a much faster rate than revenue, we're not building data centers because we don't have demand either. So these are all indicators of the scale of demand that we're seeing across the industry. Another key metric that I think is important to grasp is that the number of customers that spend more than $5,000,000 a year with us on OCI directly, this doesn't include the other parts of our business, not talking about database license revenue or support or but just on Cloud Infrastructure has grown 42% year over year. So what is it that's driving this growth?

The same strengths that allowed Larry to get the OpenAI contract have already been on display for the last few years through the aggressive buildout of hosting capabilities globally.

You launch more regions, You launch more features and functions. You scale your sales organization. You scale your ability through SIs. We're doing all of that. But the single biggest thing that we've done recently is that if you go back 13 months ago, there was one cloud where you could get Oracle Database Services.
There was one cloud that had its salespeople out selling Oracle Database Services. And it was a great cloud. Look, I'm very proud of it. But it was only one cloud. As of today, we now have 4 clouds.
And it's not just any 4. It's the 4. And I don't know how many of you have talked to different customers. I've had a lot of different conversations. There's something very different about some versus all.
And when I have conversations with customers now, they are incredibly encouraged by the fact that it doesn't matter which Cloud they choose. They can maintain their investment in the Oracle database. They can move that into the Cloud and still get all of our best and greatest services. This, along with all of the other investments we're making into our general purpose public Cloud, is what's causing us to have such high growth, for example, and the number of customers spending more than $10,000,000 in the enterprise space year over year. And I want people to also grasp I'll talk about the number of regions we're launching here in a minute.
We have several 1,000 racks of capacity. And by capacity here, I don't mean we land the racks ahead of time. What I mean is that we have plans for this is the size of the market that we see in our conversations with ourselves and with our partners. If you take a look at this map, you can see a few things. 1 is that we need a bigger screen because there's not enough place to put all the dots.
But we have a lot that we've been doing both across our commercial regions, our dedicated Cloud regions. But when you add to it the huge investment we're making across our multi cloud partnerships, you realize that the available locations in which you can procure our industry leading, best in class, highly differentiated data platform services, you're just able to procure them in so many more places than you were yesterday. I'm gonna take a moment and try to get everyone here to understand one critical point. And this is something that, if you get it, you're going to feel like I'm spending 3 minutes on a topic that is obvious. But I've talked to enough customers now who, even after I've said this, and probably is feedback for me, I'll put it in my performance review, get better at explaining technology to people.
But it's really important to understand the way in which our multi cloud strategy is different than what anyone has done before. So if you go and you look at a traditional company, So if you go and you look at a traditional company so I'm not going to name names, but if you think about companies that are doing analytics on Amazon and Microsoft and Google or companies that are doing databases, the way in which they run is they have a service a service and they run that thing on top of those clouds. So you go to Amazon and you procure some EC2 instances and you procure some Elastic Block storage and you procure some S3 storage and you build your application, your service. And then when you want to do Google, you have to go and redo that thing. And you have to use it on top of that cloud.
And the same thing applies for Microsoft Azure. That's not what we've done with OCI. What we've done is we've created a 1st in class ever done before partnership where we bring OCI and we extend it into the other Cloud provider. Now, the reason that's important is that it's important for us. It's important for customers.

The play to put the hosted Oracle database offering on all providers is actually quite impressive. If we let Larry explain it from the earnings call:

Lawrence Ellison: We have gotten the entire Oracle cloud, the whole thing, every feature, every function of the Oracle cloud, down to something we can put into a handful of racks, three racks. We call it butterfly. It costs $6 million. So we can give you the we can give you a private version of the Oracle Cloud with every feature, every security feature, every function, everything we do. For $6 million. I think the cost for the other hyperscalers is more than five more than a 100 times that.
So we can actually give our customers cloud at customer, the full cloud at customer, and we have companies like Vodafone in I I'm not sure which companies I can name or which companies I can't. We have large companies that are buying basically their own Oracle Cloud region. In fact, multiple Oracle Cloud regions. Because they don't want to have any neighbors in their cloud. They don't want other companies in their cloud. But they want the full cloud. They want to pay as they consume. They want all the features, all the function, all the safety, the security. They don't want to have to buy it. They don't want to have to buy and own the software and the hardware. They want us to maintain it, build the network, supply all of that, and they just want to pay for consumption.
We can do that at an entry-level price that's 1% of what our competitors can offer. That's one thing.

So basically Oracle builds custom hardware and then installs its full software stack on it. Then it can either manage it for you in a specific region in OCI (or as he said, basically a customer buys all of the capacity that will sit in this region and essentially "owns it") or they'll go and set it up at a hyperscaler data center and you can access it through that network.

There aren't really other players doing this because they either lean into the customer managing it themselves (Dell) or because they enjoy such high margins as a shared cloud offering that they have no reason to offer this level of control to end customers (AWS/GCP/Azure). More importantly, they offer a lot more than just instances and one specific suite of software - you can't really buy a $6 million server rack and now say "ok, I can run all of AWS's native software and ISVs' offerings on it".

So as we come up with a new hardware platform, the next generation of Exadata, the next generation of our highly optimized network, I don't have to go and try to bargain with these multi I don't have to go and try to bargain with these multi cloud partners to allow me to use that technology. It's my technology. I put it in there. The reason customers love that is that they get the same level of service and quality. It's not a matter of, well, it's great.
We rolled it out to OCI, but it's going to take us 18 months to get it into Google. No, it's the same service. So when I was having a conversation with customers yesterday and they said, hey, Clay, so what are your references for this recently launched 4 regions with Google? I go Fusion, NetSuite, Exelon, FedEx, every single customer that runs their databases in our cloud today. And they go, well, I don't understand.
It's the same service. I don't mean it's like it's not even a separate copy of the same service. It's literally the same service with the same functionality. Now, I know, again, it feels like there was a horse and it was no longer alive and I was hitting it. I understand.
But it's important everyone here understand the true value of that. The customers get all the best capabilities that we have instantly. We love it because it massively simplifies our management. We don't have to go in and have 4 copies of this service with extreme cost and overhead. It's the same thing.
And our partners like it because what they know is that they actually get the same quality across all of them. I don't have this conversation with Microsoft or Google about when do I get it. It's like, great. It's the same. They're happy because they get the same capabilities.

So that's the Oracle Cloud Infrastructure advantage. It's the best place to use Oracle products and they've gone through a lot of effort to learn how to run cloud infrastructure at scale, which they are now monetizing as an almost managed IT service. Does this suddenly make it a great place for tech sales? Let's hear from the trenches as shared on Oracle's page on RepVue:

Oracle is a 48-year-old company that's full of B and C players. Its brand with new talent and customers is non-existent, the pay is mostly poor and the only customers that buy a lot also come with significant history. While SAP has similar challenges as covered in my article on them, they've always had a strong sales culture and a moat by itself in supply chain/manufacturing.

Oracle was mostly saved from complete irrelevancy by Oracle Cloud Infrastructure and has been able to ride that strength into undoubtedly an impressive pivot. Is this now going to lead to a new generational run for them, similar to Microsoft?

From my point of view, this looks unlikely right now. All of the interesting bets that got them here in the last years were pushed by Larry. He has earned his reputation as a visionary, even in the closing chapter of his career. Without him, the most logical step is for OCI to become its own company and step away from the burden of the Oracle Database.

Oracle itself is a hard pass for anybody who aspires to do something meaningful with their tech sales career. OCI is an option but let's be honest, it's the only team that those 202k people want to be a part of. There are thousands of reps who have the political clout internally and history with the customers that are ahead of you for the good territories.

The Tech Sales Newsletter #110: The Larry Supremacy

The key takeaway

Oracle Cloud Infrastructure is here to save the day

The Tech Sales Newsletter #109: It’s time to talk about Cloudflare