Q2 2023 Oracle Corp Earnings Call
Yeah.
[music].
Please standby were about to begin.
Good afternoon, ladies and gentlemen, and welcome to the Oracle Q2, 2023 earnings Conference call. At this time all participants are in a listen only mode and please be advised that this call is being recorded after the speakers' prepared remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star one on your.
Telephone keypad and if you would like to withdraw your question simply press Star one again and at this time I would like to turn the call over to Mr. Ken Bond head of Investor Relations at Oracle. Please go ahead.
Thank you Bob Good afternoon, everyone and welcome to Oracle's second quarter fiscal year 2023 earnings Conference call.
A copy of the press release and financial tables, which includes a GAAP to non-GAAP reconciliation and other supplemental financial information can be viewed and downloaded from our Investor Relations website. Additionally, our list of many customers who purchased Oracle cloud services are went live on Oracle cloud recently, we will be available from our Investor relations website as well.
On the call today are chairman and Chief Technology Officer, Larry Ellison, and CEO Safra Cats. As a reminder, today's discussion will include forward looking statements, including predictions expectations estimates or other information that might be considered forward looking.
Throughout today's discussion we will present, some important factors relating to our business, which may potentially affect these forward looking statements. These forward looking statements are also subject to risks and uncertainties that may cause actual results to differ materially from the statements being made today as a result, we caution you against placing undue reliance on these forward looking statements and we incur.
Or would you to review our most recent reports, including our 10-K and 10-Q and any applicable amendments for a complete discussion of these factors and other risks that may affect our future results or the market price of our stock and finally, we're not obligating ourselves to revise our results or these forward looking statements in light of new information or future events before taking.
Questions will begin with a few prepared remarks and with that I'd like to turn the call over to Safra.
Thanks, Ken and good afternoon, everyone.
Well simply put we had an outstanding quarter total revenue for the quarter was more than $200 million above the high end of our guidance range and grew 25% in constant currency.
Even excluding Cerner total revenue grew 9% in constant currency, that's higher than Q1 and on top of a revenue be this time last year.
The strength of the quarter is even more amazing given that the currency headwind was higher than what it was when I gave guidance with 6% for revenue and.
A nine and a half that headwind for earnings per share and yet.
We still exceeded the high end of my USD guidance for both total revenue and earnings per share and as you can see from the numbers. We continue to experience clear company specific and product specific momentum.
The reasons are many but it boils down to a few key points of differentiation.
First more and more customers are recognizing our second generation infrastructure cloud as being fundamentally better architected for higher performance better.
Better security and unmatched reliability versus the older first generation hyper scale cloud providers.
Customers appreciate the flexibility of our service and business model that enables them to deploy our technologies, where it serves them best whether that be in the public cloud in dedicated.
<unk> regions around the world or in a true cloud at customer implementation.
And third customers recognize the value of an end to end integrated stack of applications, both horizontal like ERP and HCM and.
The supply chain and industry.
<unk> applications that focus on their industries and all of it is on our Gen. Two infrastructure, which is designed perfectly for them as they move through.
As customers increasingly look to better value out of their technology investments many discover that oracle is much better compared to other alternatives.
Gartner, formerly recognized OCI by moving us to visionary status in its cloud infrastructure and platform surfaces report for the first time.
In addition last week, we were awarded a J WCC award at the U S Department of defense as they also recognized our capabilities.
As all of these differentiators come together and our business continues to accelerate we expect organic growth for our fiscal year 2023 cloud revenues will be over 30% in constant currency.
Now to the numbers as always I'll discuss our results using constant currency growth rate too.
To provide a full picture both organically and otherwise I'm going to go over the revenue results, including Cerner and then some of the revenue results. Excluding cerner. So you can see what's going on.
Total cloud revenue now that SaaS, and SaaS, including Cerner with $3 8 billion up 48% in constant currency with Ias revenue.
One 1 billion up 59%.
And SAS revenue of $2 8 billion up 45% now excluding Cerner total cloud revenue.
<unk> plus <unk> was up 27% in constant currency at three 3 billion.
Total cloud services and license support revenue for the quarter, including Starner was eight 6 billion up 20% in constant currency driven again by our strategic cloud applications Autonomous database and of course, our generation two.
OCI.
Applications subscription revenues, which includes support were $4 1 billion up 35% in constant currency infrastructure subscription revenues, which also include support were $4 5 billion up 9%.
In constant currency.
Application subscription revenues, including support.
But excluding Cerner worth $3 3 billion up 9% in constant currency SaaS cloud revenue again, excluding China with $2 2 billion and was up 16%.
Now our strategic back office SaaS applications now has an annualized revenue of $5 9 billion and grew.
26% in constant currency, including fusion ERP up 28% and net suite ERP.
Up 29%.
As mentioned already infrastructure cloud services revenue was up 15, 9% in constant currency now excluding legacy hosting services.
Infrastructure cloud services revenue grew 69% with an annualized revenue of $3 8 billion, including OCI consumption revenue, which was up 88%.
<unk> cloud at customer consumption revenue up 83% and autonomous database.
Up 50%.
Software license revenues.
Including Cerner, we're $1 4 billion up 23% in constant currency.
Up 9% without Cerner.
What is increasingly resonating with customers is that in an environment, where IP investments need to happen fast and tangible return on investment only Oracle offers customers the flexibility to manage their technology estate. So they can.
Deploy incremental investments, where it brings them the most immediate value.
It also helps that the purchase of technology licenses from Oracle enables them to move to the cloud as they are ready effectively providing an onramp to Oracle cloud services. So.
All in total revenues for the quarter were $12 3 billion up 25% in constant currency, excluding <unk> revenue contribution of $1 5 billion organic revenue was up over 9% in constant currency.
Feet.
As a reminder, we no longer operate in Russia, causing total revenue growth to be negatively affected by over 1% of growth over last year.
Shifting to margins.
The gross margin for cloud services and license support was 79% as a result of the mix between support and cloud.
Last year Oracle license support revenue with its mid nine these gross margins represented about 65% of the total number of cloud services and license support revenue now it's down to 53% and this is happening because.
Our cloud services are growing much much faster than license support.
By the way license support grew 4% this year. Additionally.
Additionally, I would note that Ias gross margins improved again this quarter and I expect <unk> gross margins will continue to improve.
In response to accelerating demand, we have continued to build data center capacity.
We have seen that as those centers fill up margins go up like they did this quarter.
Most importantly, gross profit dollars of cloud services and license support grew 13% with Cerner and 6% excluding cerner in Q2.
non-GAAP operating income was $5 1 billion up 12% from last year.
Operating margin, including Cerner was 41% as we continue to integrate cerner in the quarter as we drive cerner profitability to Oracle level and continue to benefit from economies of scale in the cloud we will not only continue to grow operating in.
Income, but we will also grow the operating margin percentage further I expect that this year will be the trough year for operating margin percentages.
The non-GAAP tax rate for the quarter was 24, I think I guided to 25, so basically it worked out where we thought and non-GAAP EPS was $1 21 in U S dollars.
Down 1% in USD up 7% in constant currency the GAAP EPS was <unk> 63.
At quarter end, we had nearly seven $4 billion in cash and marketable securities. The short term deferred revenue balance was $8 7 billion up 14% in constant currency.
Over the last four quarters operating cash flow was $15 1 billion and free cash flow was $8 4 billion with capital expenditures of $6 7 billion.
In addition, we now have 40 public cloud regions around the world with another nine being built.
In addition, 12th of these public region interconnect with Azure, giving customers true multi cloud capabilities.
We also have many cloud customer implementations dedicated regions and another nine national security reagents with increasing demand for more as customers want to have their data protected in their country.
We have we are careful to pace, our investments appropriately, but need to continue to build to meet our accelerating demand.
Capex this quarter was $2 4 billion as we continued to invest in our cloud to meet this accelerating demand.
With triple digit Ias bookings growth the last couple of quarters, we now expect to spend about this amount per quarter for the next few quarters as we build capacity for our customers' needs. This level of spend though will not negatively.
<unk> impact our operating margins as we scale.
When I talk about accelerating demand that demand is reflected in the remaining performance obligation or our PEO balance, which is now at $61 2 billion up 68% in constant currency due to strong.
Cloud bookings as well as to Cerner I will also note that the organic <unk> growth rate in constant currency accelerated to 28% in Q2 up from 22% last quarter and approximately 48%.
Of the total ARPA.
Is to be recognized as revenue over the next 12 months.
Now as we've said before I know you're tired of me, saying it but I will we're continuing we're committed to returning value to our shareholders through technical innovation strategic acquisitions stock repurchases prudent use of debt and a dividend.
This quarter, we repurchased six 1 million shares for a total of $448 million. In addition, we paid out dividends of $863 million in the quarter and board of directors declared a quarterly dividend of <unk> per share.
Our fundamental principle is to grow non-GAAP EPS, while substantially increasing cloud revenue growth and given our increasing confidence we will continue to prudently invest as there is strong demand for our cloud services.
So now let me turn to my guidance for Q3, which I'll provide on a non-GAAP basis.
Using currency exchange rates as they are right now currency should have a 4% negative effect on total revenue and at least a 6% negative effect on EPS in Q3.
As I say every quarter the actual currency impact may be different by quarter end, but we've got to use the number so we're using the number right now.
Total revenues for Q3, including Cerner are expected to grow from 21% to 23% in constant currency and are expected to grow from 17% to 19% in USD.
Total cloud growth, including Cerner is expected to grow from 46% to 50% in constant currency.
And 43% to 47% in USD.
I expect the total cloud growth for the fiscal year, excluding cerner will be above 30% in constant currency.
non-GAAP EPS is expected to grow 9% between 9% and 13% and be between $1 23, and $1 27 in constant currency again due to currency headwinds.
non-GAAP EPS is.
It is expected to grow between four and 8% and be between $1 17, and $1 21 in USD.
And as I've said before Cerner will be accretive to earnings this year, including in Q3.
My EPS guidance for Q3 assumes our base tax rate of 28, 5%, which is up from 19% last year. However, one time tax events could cause actual tax rates for any given quarter to vary.
And with that I will.
I'll turn it over to Larry for his comments.
Yeah.
Thank you et cetera.
Okay.
I could go over primarily Eric I'm going to go over our customers our new wins.
The structure, and then customers and wins and go lives applications, but I'm going to start with infrastructure.
During Q2, we signed multiple customers.
Two contracts exceeding $1 billion of infrastructure contracts exceeding $1 billion, let me be clear.
Multiple customers.
Signing contracts for ability.
We're a $1 billion worth of events infrastructure. So given that that's been added to our backlog, we expect our infrastructure business.
You can continue to grow very very strongly into the future.
There were 2000 2000 infrastructure customers.
We have a total of 55 regions, that's public regions plus national security regions in the other regions.
That's more than AWS or Microsoft or anybody.
Which may surprise some people.
Gartner as Safra mentioned moved us into the business visionary quadrant for the first time.
Let me just start naming specific customers and give you a flavor unknown a large customers small customers are going to focus a little bit on it in a bunch of international customers to let you know that our investment in data centers all over the world is really paying off.
So our customers include a pickup was blue Fedex Deutsche Bank, Tokyo Stock Exchange, Let me, let me take a moment.
Tokyo Stock exchange, we're the only ones running a major stock exchange and this is not the only one because our cloud is.
Very secure and extremely reliable it doesn't go down.
My favorite quote from Mythics phone company in the United States with the difference between Oracle's cloud and the other clouds or simply the Oracle cloud doesn't go down.
I think thats, a very important issue when you have enterprise applications like the stock exchange.
Where you can't ever do that.
So just as another big customer Vodafone the bulk of it is similar as in similar problems of European gathering the bonus system has got Vodafone Deutsche Telekom Enbridge Kaiser.
A huge.
Health care.
Primarily in the United States and videos.
And a bunch of others that mood lots of AI artificial intelligence and machine learning workloads to the Oracle cloud because with turns out we're really good at that we're better than that than any of the other clouds, which may surprise.
People Schneider electric Telecom Italia of Verizon and lots lots more market.
First of all we published a big lift on.
At Oracle Dot com.
And every quarter.
New customers to that so in the quarter, we added United Airlines database wins in the quarter United Airlines.
Migrating all flight operations to the Oracle.
Extra data cloud.
The albertsons.
Again, moving to the exited the cloud service database.
Mitsui in Japan again.
Moving to other databases to Oracle again again this is.
This is the beginning of a very major.
Very large business for US is our database franchise moves primarily from on premise into.
And to the Oracle cloud peripheral career, a big vessel services company in Japan margins migrating.
Moving their oracle databases to the cloud unit.
Curious, Cuba led healthcare once again moving moving.
Did it make sense to the Oracle cloud Penske truck leasing.
Using a ton of moving to autonomous database.
Homeserve.
Plc in the U K government agency is moving to automate autonomous transaction processing systems, they're not just moving an existing Oracle database in the cloud.
We're upgrading from our on premise Oracle database to our autonomous.
Database, which is the only available in the cloud.
Iberia Express Big Telco same thing.
Moving to autonomous data warehouse, Hey, Jeff the idea is the autonomous data warehouse mixed database administration, very simple and fast.
Entirely automated there is no database administration.
Doug Otto taxi again.
Alright.
In APAC, a smaller company again moving in moving their databases to autonomous.
Two our autonomous system.
Matthew trends Big Transportation Cup in Australia.
Since then.
Yes.
Our autonomous transaction processing.
The.
Grow big.
J D.
Japanese wholesale company autonomous moving towards anonymous data database backup.
Banco Safra, but this is by the way this is not our CEO does not own a bank.
This is not an internal if you did not buy our database, but there is a big bank in Latin America, Banco Safra, and they're moving all of their mission critical apps to two.
Two OCI as is to Bradesco.
Yeah.
Save the same thing.
Sure Bill to society in the U K again autonomous data warehouse and Nestle.
Our food giant.
In EMEA.
Moving of their analytics systems to autonomous data warehouse on their desk.
Huge customer.
Okay.
I mentioned.
A couple of calls ago that we have a new version of our mics equal open source database.
And we added a new ultra fast query processor called heat wave to my sequel, and that's doing extremely well we have a number of companies do.
Doing that doing.
Doing that migration.
Medallion.
Credit club.
It's a long list of people that are moving.
To my sequel.
Take advantage of the fact that our query processor and our version of my sequel is 100 times faster I really mean that we have all the benchmarks we publish all the benchmarks and we published the source code. The benchmark. So you can duplicate those results 100 times faster than <unk>.
<unk> then.
Then the Amazon equivalent.
Called Aurora.
Right.
Once version of my sequel.
As I had mentioned earlier.
Sure.
Our.
Partnership with Microsoft Azure is going extremely well, we have a number of companies running applications and as you were and then Azure is connected to OCI. So the databases in OCI in the obligation as an issuer.
The Belgian railways as one Honeywell in the United States.
The big.
Energy and utility companies Telecom Italia, and locally but that more that multi cloud system is doing extremely well and Microsoft and we think that is the future of cloud. We think the future is cloud is not four walled gardens.
AWS.
Microsoft Google and Oracle, we think those those clouds are all going to interconnect and then customers will pick the most.
Most appropriate service, where their particular needs and mix and match between the clubs.
Okay.
<unk>.
A lot more of a major city in the southwest which are not allowed to mention is literally migrating everything.
Two.
OCI.
Sure.
Lambda, which is the big AI machine learning specialist company.
Moving the bulk of their workloads to OCR, using Nvidia Gpus and our best.
Very very fast network to interconnect them and this is a pattern.
<unk> been doing that.
Latent space is doing that Nvidia themselves are doing that you are seeing a lot of machine learning and artificial intelligence workloads moving from other cloud too.
Two OCI because were faster and again the cloud business faster when you charge by the minute faster means cheaper.
Give me one second Alexa require sorry about that goes I think Jeff Bezos did that.
Okay. So.
Minnesota State colleges and universities National Institute of Health.
These are all new cloud customers.
To your cloud customers, Sierra Nevada Brewing again from very large.
Two medium sized companies are moving to OCI and lots of them.
Twist Biosciences.
It is moving in health care again AI workloads.
OCI using Nvidia Gpus.
AIA life insurance company.
Big.
A big.
Big Financial services Company again is moving moving to OCI and databases OCI.
And India is I forget Pradesh Power Corporation, a giant utility yes.
Moving all of their metering and billing applications to OCI.
<unk> intelligent information technology.
Moving their Iot platform from AWS to OCR all and.
And Theyre also using my sequels heatwave.
Algar Telecom Brazilian stock exchange.
Clairaut again, big media telco moving to OCI and sell.
Unit to receive a large healthcare company in Latin America, moving to OCI vivo.
Again, moving to OCI bank.
Banco de Chile.
Ebay.
Another financial services company of Rabobank DP World, The transportation logistics company in the Middle East.
Austin trends in partnership.
A municipality in Texas.
Perfect and interesting customer because they've been using oracle ERP and APM and our applications for a while a long time now they're moving they're moving their infrastructure.
To OCI.
Oman telecommunications, a huge French telecommunications company on not allowed the mentioned Theyre moving.
<unk>.
OCI.
Oxford, Netapp or gene sequencing companies is moving.
From.
AWS to OCI.
Where there is going to store, our gene sequencing, but theyre not the only just GA ing sequences going to OCI. They also do analytics.
Figure out if that's what they've sequences a new version of <unk>.
COVID-19 or another pathogen.
Average and they've never seen before extremely important application for world Health.
Right.
Additionally, Saudi Ministry of media Eco Bank financial services in EMEA.
Lopez and limited Morris <unk>.
Retail operation again, all moving to OCI H DSB Bank and walk you back I'm going to stop there, but we published a long list, but there's tremendous momentum tremendous momentum in large number of customers from all over the world very large and medium sized companies moving to.
To OCI.
And the business the business is growing very strongly as safra pointed out in the numbers.
Okay and in the back and applications.
Do this quickly.
We're just winning in the backhaul.
Well in 2000 customers in.
Infrastructure in the <unk>.
Cloud, we have 11000 fusion ERP and HCM customers alone in applications just fusion customers. We have 11000 that we have.
Yeah.
Probably closer to 30000 30000 net suite customers on top of that so we have lot of customers and applications we have.
And the applications cloud business for longer than we've been in the infrastructure at Google Cloud business, we're extremely strong in healthcare Cleveland Clinic Mayo clinic, Mount Sinai Providence St. Joseph.
Albert the Kaiser Permanente National Health service in the UK.
Long list of providers that is a partial list or are using Oracle ERP <unk>.
Hi chain HCM applications, but it's not just the clinical providers that are using.
Our systems.
Here's the healthcare payers, so again as we tackle health care with in conjunction with our Cerner acquisition, we're not just automating providers. We're also automating ayers.
We're also automating pharmaceutical companies as they do clinical trials, we're trying we're trying to automate the entire ecosystem.
Just a fraction of it so I mentioned the list of providers and payers, United Healthcare Blue Cross Blue Shield Humana, Highmark Health Health care Service Corporation's independent Blue Cross Brighthouse, so payers as well as providers were extremely strong.
That I mean.
Again, I'll just leave it with extremely strong.
Healthcare wins in the quarter in Q2 Cigna.
A huge a huge payer with Emirates health services.
A big.
<unk> provided a win.
Where we beat.
Cross country Health services, where we'd be.
Workday and us.
Henry Schein is a provider of health the health care products for.
And there we.
We want we wanted their data bad, but again it is the entire health care infrastructure.
That we are focusing on as we try to automate health care systems around the world.
Go lives go lives in the quarter tenant health at 65 hospitals 235000 employees. They went live.
On Asia, HR payroll and recruiting Cleveland Cleveland Clinic.
It is going alive, it's called Cleveland clinic, but they also an update on hospitals all over the place.
They have gone they've gone live.
And a bunch of regional hospitals in Florida University of Chicago.
<unk> et cetera has gone live Baptist Health care, It's gone live 12 hospitals with 26000 employees.
<unk> Center.
Gone live in the quarter. So, we're just getting stronger and stronger in health care.
So let me move on to financial services or other another industry that we've been very very strategic and key to oracle's future financial services, specifically banking.
And we're very very strong there are bank of America.
In terms of ERP HCM supply chain. Our customers include Bank of America, Jpmorgan Chase Citigroup Bank of New York Mellon Bandar Santander TD Bank in Canada, HSBC in the U K UBS credit Agricole Society Generale.
All credit Suisse, Sumitomo Mitsui Macquarie Bank.
This is a partial list.
We are extremely strong in the banking sector, and what youre going to see an Oracle ERP.
With our strength in the banking sector is we will be offering.
Loan origination of four BW commerce, one of the things we're doing with the new version of Oracle ERP.
If you if you're a customer that is buying something in the U of Oracle ERP in Europe .
And you are a company that selling something and you have Oracle ERP.
The way that trend that the transaction will occur it will be entirely automated within the cloud so youll submit a purchase order to buying the buying ERP system.
Submit a purchase order to the selling ERP system.
And if you need to borrow money.
We will originate alone with one of our banking partners.
The product has to be shipped we will we will schedule the shipping and track the shipments with one of our logistic partners.
Our ambition here is to completely automate <unk> commerce between buying and selling companies that are running Oracle cloud ERP.
And manage all of the financing and insurance and logistics associated with that transaction, we do a really good job I think automating.
B to C transactions, Amazon does that extremely well, a walmart does that extremely well, but we don't do a great job of automating b to b transactions.
And that's what Oracle Oracle's ambition is to do that and we're in a great position because we are so strong in cloud ERP. So its an oracle system.
And Oracle procurement system on one end of that transaction, it's been Oracle order management system on the other end of that transaction, we have very strong partners in finance insurance and logistics. So we can completely automate the entire transaction, where <unk> transactions begin to look like b to C transactions.
They are fully end to end automated and that's a huge new business for us and our partners.
Okay.
Let's see financial services wins in the quarter, we've added MN T Bank TD Bank dialog Securities Hilltop Holdings.
Farmers insurance next fee, which is where.
Where we reported we replaced.
At <unk>, it's an Italian bank, we replaced that SAP at TD Bank.
Let's see what else.
<unk> services go lives.
Amtrust Blackrock.
Go live they are.
They are 10 trillion dollars of managed assets Oracle now has nine of the top 10 asset management firms running on the Oracle to Oracle cloud ERP.
First ran bank a bunch of other banks.
I don't want to take up all the time, so I'm going to stop there we have we have a.
A lot more data on our website that will tell you.
The whole a numeric still more customers that we acquired in this very strong second quarter and that went live in the second quarter with that I'm going to turn it back over to Safra.
Okay. Thank you Larry but if you could prepare the audience for Q&A I appreciate it.
Certainly Mr Bond, ladies and gentlemen, just a reminder, star one piece for any questions. This afternoon, we will take our first question today from Brad Zelnick of Deutsche Bank.
Great. Thanks, very much for taking my question and congrats on the solid results.
Larry Oracle has a rich history of being a price performance leader and just about everything it does but technically speaking why exactly does OCI have an inherent cost advantage and how sustainable is that advantage.
Well well.
Maybe the most interesting thing is we have a much faster network than anybody else, we have a fundamentally different network than any of the other cloud cloud providers, we have what's called in our DNA network that we had to build because our exited of machines in our database.
Actually glued together a lot of a lot of computers.
And when you had a single database application that could run on one computer or it could run on a cluster of computers.
The two computers for computers, a computer's whatever so that there was no single point of failure.
One of the beauties of the Oracle database, one of the big differences between the Oracle database and other databases.
Is that the Oracle database, a single application could run on multiple computers, if one of those computers would fail.
The obligation would keep running it was fault tolerant it would tolerate a failure of a machine other people don't have that.
But in order to do that we had to make our network. If we're going to have a cluster of four machines running a single database that we have to make that network between those four machines very fast.
And that's called the <unk> network it means that.
One computer attendant immediately access the memory of another computer without going through an interrupt it's a very fast way to interconnect computers.
And have them Act act as a group we.
Built out for our entire cloud.
So we could run our database our Oracle.
Real application clusters database on any of our computers in our cloud.
Now big.
Because we built this hyper fast network.
It turns out it has more utility than just running the Oracle database. So if you're running a cluster of computers doing a simulation.
A car crash simulation that was one of the first applications people noticed ran much faster on Oracle.
It's much bigger application I noticed ran much faster and Oracle was neural networks.
And machine learning workloads run much faster on Oracle.
Because our network is just.
Intrinsically much faster and there are other also there are security and reliability of that has to go along with that.
So our networks configured we actually have.
All of our computers actually have two networks I'm not going to go into all the details, but our computers are fundamentally different than any other cloud cloud company we have.
Two networks.
One of which is on the internet.
One of which Interconnects all of our customers our customers computers and the other which is our if you will our control network, where our and computers that run our cloud control software, which is isolated from the customer software so the customer.
Yes.
Tamper with our cloud cloud control software they can't get control of it and we can't see the customers' data that is unique to Oracle.
But because we have the two networks and because one of the networks is already a MA we just run much much faster much more reliably naidoo.
And it's.
Fundamental advantage.
They can't compete with unless they rebuild their cloud from scratch.
Okay.
Thank you Larry next question please.
Thank you, we'll take that question now.
Winslow of credit Suisse.
Hey, Thanks for taking my question on your thoughts on another strong quarter really two metrics jumped out to me. This quarter first was revenue accelerated to 59% from 58% and 39% the prior two quarters and organic RBR growth also accelerated to 28%, which is pretty phenomenal this quarter from $22 17 in the prior two quarters can you just give us sort of.
A breakdown of what's driving this continued strength compared to some of your cloud competitors and the pads and Ias world.
Spirit's decelerating growth growth in recent months and are there any workloads in particular, they are driving the relative strength of OCI.
Okay.
I don't know Larry if you wanted to take it or ice to April .
You can take out the workload the workloads new.
Their workloads AI AI and machine learning is a huge is exploding and video and video the ex the <unk>.
But the people who provide the gpus for most.
For most.
Those are theyre, moving a huge amount of stuff to the Oracle cloud and a bunch of other companies that are.
We are doing that but thats, one new one I mean, obviously database, but I'll, let I'll, let that question I really want to zero.
It's really across the board to be fair, We've got high performance computing, we've got most of the auto companies doing their simulation on US and then we have Oracle workloads autonomous database and other workloads, we have extremely broad.
STREAMWAY broad moves I think I told you in previous quarters that of course, our growth rates are higher because we're smaller but yet as we grow we're actually accelerating because of exactly the feature instantly already covered in the last question.
<unk> customers are coming to us often not expecting the phenomenal results and remember time is money on cloud. So if you are more pro format. It is much less expensive, whether it's oracle workloads or straight compute or storage or other.
Workloads.
The other thing is you have to understand that our cloud customers are national security regions. All of those are being contracted and we are clearly the choice for governments to maintain their sovereignty over their data we can land a center very.
Quickly and they have a and they fill up very quickly so.
We really havent coming from.
From all areas and then of course, our applications business at Larry basically said it I mean, we're at and we're winning consistently.
After deal both.
Our E business suite and people stopped and JD Edwards customers move to us, but also SA P installations choosing us.
For over what they had before so it's just on all fronts frankly.
Great well, it's awesome to see everything that you've been talking about the last couple of years that are playing out so keep up the great work.
Thank you.
Thank you we'll go next to Jonathan <unk> of Guggenheim.
Thanks for taking my question.
Larry Thanks for the answer to the first question.
It's something we've been thinking about that's going to help as we dig into better understand the benefits of OCI, but it's amazing to hear the core differentiation of rack continues to drive differentiation, even 20 years later.
My question is actually for SaaS Safra.
Safra you mentioned your flexible business model in your prepared remarks.
His unique B Y O L. You were a pioneer in doing that and license was surprisingly strong again can.
Can you talk in a little more detail about what's really driving that license strength.
So contrary to I think the spheres.
Peaceful paths the Oracle database is still the biggest part of life by far so most important part the database remains strong because customers understand that they can be y O L. Bring your own license and they can have coverage whether they're on premise.
In the cloud or moving in between the two so again really always the big number but we've got growth rates that are very strong in analytics. We have growth rates that are super strong in Java, we have growth rates that are strong in the industry.
Streets areas some of our industry its application and then so I want to make sure I gave you the numbers both ways with Cerner, we have a growth rate of 23% because of course, yes, the cerner license without cerner, it's 9% growth so.
Even without Cerner, we have license growth after a very strong.
Growth rate, our full year ago in license. So again big dog is of course technology. That's the bulk of it but we've got a few industry apps and and a little bit of Cerner and it just remains just super strong.
Okay that makes sense it sounds like a lot of things are working together here. Thank you. Thank you very much.
Absolutely.
And we'll go next to Mark <unk> at Sanford Bernstein.
Thank you very much for taking the question I really appreciate that.
The ability to ask the question and congratulations on the quarter two related questions on churn as safra.
Or are we on the Sterne integration process as well as taking out the costs and when do you think you can drive those long term costs over time and Larry we've heard a lot of great futures at Oracle World about churn and what you can do in health care be interesting to hear what progress you've made recently.
<unk>.
Sure So mark we've oney.
Turner for about five months.
And I will tell you that they continue to do better than we had projected internally. So we're very very happy, but we are still at the beginning we don't want to do anything that will.
Damage the business and of course, we're very very focused on those customers, but we are already having some level of savings, but ultimately just so that you understand our expectation is we will run them at typical Oracle margins. So we've got quite a way.
To go.
And yeah.
I think over the next couple of quarters yields Youll see continued improvement.
We've done some of our operational integration and and.
Hany asleep.
I think they continue to over perform for us so.
We are doing this in a very.
Very careful way so as not to put any any issues for our customers and making sure they're successful on the technical side Larry.
That's for you.
Well actually on the technical side of course, but we're trying to do is build nationally not just provider.
<unk> systems.
Words with Cerner did primarily in competition with epic is the automated hospitals.
And.
Yes, we want to automate hospitals, and clinics and doctors' offices, and do that and we certainly wanted to automate providers.
We're layering on top of that is we wanted to do national public health, we are doing national public health systems I mentioned, the Oxford <unk>, that's an early warning system.
To detect the next.
The next pathogen that could lead to a pandemic.
These global these global public health systems need it needs to be built and we are in discussions we are in discussions with us.
Not companies, but countries.
Building.
Deploying our global early warning system. So we can detect the next pathogen that threatens to turn into a pandemic. We can catch it early enough that we can prevent it from being a pandemic.
God forbid there is another pandemic that we have up to the minute up to the second data about.
How the country's infrastructure is managing the hospital hospitalization rates and vaccination rates in all of those things. So we can better deploy and manage our resources during the pandemic. So we don't have a repeat of Av.
Of the things that went on during COVID-19, so I expect that.
Just got back from visiting.
Some perspective customers that are countries that we will be signing contracts.
With a number of countries to build these national systems.
These.
Contracts are enormous.
I mean, absolutely enormous and there will be several of them. So as I said in my note in the press release.
The scale of this health care opportunity is unprecedented but so are the responsibilities that go along with it we have to we as humanity has to do a better job.
Delivering healthcare to people than we have done historically and we can never have a repeat of the COVID-19 pandemic and I think there is this worldwide sense of urgency and national consciousness about getting a new generation of systems out there that helped us a first prevent and then manage.
Our health care.
<unk> and better manage our health care systems.
As far as I know Oracle is the only company in the World that's trying to address this issue.
And we're about to sign up a number of countries.
That will work with us on doing just that.
Excellent. Thank you so much.
Thank you and we will take our final question. This afternoon from Raimo <unk> Barclays.
Thanks for squeezing me in one quick question, if you think about the global environment.
It's not the time to look at.
Olden days I remember when I was at Pwc It wasn't the time to cut off.
Look at your back office systems, but you're kind of growing really nicely net speed is actually kind of outgrowing now fusion a little bit could you talk a little bit about the drivers and what you're seeing out there. Thank you.
Yes, let me let me start that Larry can add if you want so I want to remind you that we are global right, which includes whether were in Europe and in the United States, but we're also in the Gulf States and really in Asia different parts of Latin America and is there are.
Always companies that.
Get to the point, where their business they cannot afford to keep using their older systems.
Spend too much using them they spend too much running them and they are actually holding them back and they know that and I think one of the things many companies learned during COVID-19 with those companies that did not get on some sort of a track to get a digital connection with their.
Tumors employees and suppliers.
At a huge disadvantage and so that momentum continues and it is and it is possible that in any individual country or location there could be some little slow down here or there and yet there are other countries and industries that are doing incredible.
Really well and view this as critical win when customers move to SaaS, They end up spending less but also.
Much better capabilities to sell more to work with their employees and their suppliers of course as I said their customers. So that momentum has started started.
And it just continues very very strongly and again, we are global so even when there are some issues in some regions where in other regions that are doing phenomenally well right now.
Okay. Thank you.
Okay. Thank.
Thank you Safra, a telephonic replay of this conference call will be available for 24 hours on our Investor Relations website. Thank you for joining us today and with that I'll turn it back to boat to close the call.
Thank you very much Mr Bond, ladies and gentlemen that will conclude Oracle's Q2, 2023 earnings conference call again, we'd like to thank you. So much for joining us and wish you all a great remainder of your day Goodbye.
[music].