Oracle thinks the cloud era of walled gardens is over

  • Oracle inked major deals with OpenAI and Google Cloud this week
  • As it did with Microsoft Azure, Oracle is planning to park its database in Google Cloud data centers starting later this year
  • The company's fiscal Q4 revenue jumped but profit dipped

It was a big week for Oracle. Alongside earnings, the company announced two major partnership deals: one to build compute infrastructure for OpenAI and another which will see it park its database in Google Cloud’s data centers. To hear Oracle execs tell it, the takeaway from the latter partnership is that the industry is finally entering a new cloud era.

During earnings, CEO Safra Catz noted Oracle and Google Cloud will initially offer network interconnect services in 10 regions across the globe. But she said the arrangement will soon evolve to mirror a deal Oracle struck with Microsoft late last year.

“We will be live with Oracle Database@Google Cloud in September, where customers can get direct access to Oracle Database services running on OCI deployed in Google Cloud data centers,” she said.

Writing about the deal on LinkedIn, analyst Jack Gold noted "By enabling the Oracle Cloud Infrastructure suite to run on Google Cloud, and without charging any data transfer fees, Oracle is greatly expanding its potential market and scale, while Google gains an installed base to expand its presence against Amazon Web Services (AWS) and Microsoft Azure."

On a call with Fierce, Leo Leung, VP of Oracle Cloud Infrastructure and Oracle Technology, said the Google Cloud partnership marks the continuation of Oracle’s push to break down silos between public clouds.

In a world where the vast majority of enterprises – for better or worse – operate across multiple clouds, the walled garden approach that has dominated for the past decade plus just won’t cut it anymore, he said. And the industry is finally starting to evolve accordingly.

“I do think there’s a trend. Every customer, what they really want is best of breed capabilities. They don’t actually want to be limited,” he said.

“If you could call it a second wave of what the cloud is, I strongly believe we’re beginning that next wave where the walled gardens are going to come down.”

Fierce asked Leung whether that means a deal with Amazon Web Services might follow. His response?

“The only thing I would say is it’s technically feasible to connect to other providers,” he said. “We haven’t really seen demand from other providers. We have seen demand from Microsoft and Google.”

We’ll take that as a no, at least for now.

OpenAI buzz

Speaking of new eras, it seems the wave of artificial intelligence (AI) demand is also paying dividends for Oracle. Market leader OpenAI and hyperscale backer Microsoft tapped Oracle to supply additional compute capacity for AI workloads.

What this means in practice – according to Oracle CTO Larry Ellison – is that OpenAI will take up about half of a massive data center Oracle is building and will be able to tap into the power of “lots” of new Nvidia chips.

Specifically, OpenAI will be using Oracle’s infrastructure for AI deployments – not training. Heaven help anyone who implies the latter (ahem, Larry).

“We want to clarify some inadvertent confusion,” OpenAI wrote in a statement after the deal was announced on Tuesday. “The partnership with OCI enables OpenAI to use the Azure AI platform on OCI infrastructure for inference and other needs. All pre-training of our frontier models continues to happen on supercomputers built in partnership with Microsoft.”

The deal between OpenAI and Oracle is perhaps unsurprising when you consider that OpenAI’s key backer and primary cloud partner Microsoft itself has a strong relationship with Oracle. See also: that deal we mentioned earlier that saw Oracle park its databases in Azure data centers.

So, it makes sense that if OpenAI came to Microsoft looking for more compute power that Microsoft would point them in Oracle’s direction.

Cloud comes to roost

The OpenAI deal was just one of apparently dozens of AI wins Oracle bagged in its fiscal Q4 2024 (ended May 31, 2024).

During earnings, Catz noted the company inked “over 30 AI contracts” collectively worth “over $12 billion this quarter.” That included “the largest sales contracts in our history, led by huge demand for training large language models.”

Catz said AI is helping drive a wave of demand for its cloud offerings, with cloud services and license support revenue up 9% year on year to $10.2 billion.

“We signed several large deals in this quarter, and we have many more – many, many more in the pipeline,” she said. “I expect fiscal year '25 cloud infrastructure services to grow faster than the 50% we reported this year.”

Consolidated Q4 revenue increased 3% to nearly $14.3 billion, though net income fell 5% to $3.1 billion.

This story has been updated to include a comment from analyst Jack Gold.