Oracle attributes underperformance in Q1 to internal sales team's shortcomings
Oracle, the tech giant known for its cloud offerings such as customer support application RightNow and talent management platform Taleo, is facing a 1% drop in sales for the most recent financial quarter, down to $9.0 billion. This decline has raised concerns for the company's management.
CEO Larry Ellison, however, has highlighted a positive growth in the cloud, specifically the SaaS portion of the cloud. Despite this, the company's sales force is being criticized for a lack of urgency in sales, which may be contributing to slower sales cycles or less aggressive customer acquisition and retention efforts. Although specific statements from Oracle executives about this issue were not found, the implication is that internal sales motivation and execution challenges have weighed on revenue performance.
One of the key drivers for Oracle’s cloud revenue growth is its massive data center services contract with OpenAI, valued at about $30 billion annually. This deal, part of the Stargate project, involves Oracle providing extensive data center capacity (4.5 gigawatts) to support AI workloads. This contract alone potentially outweighs Oracle’s entire previously reported fiscal 2025 cloud services revenue (~$24.5 billion) and signals strong growth in Oracle’s cloud infrastructure and data center services segment.
Oracle's cloud revenue growth also benefits from its broader cloud offerings, including cloud infrastructure services, cloud applications, and cloud platform services supporting AI and enterprise workloads. These services are driving strong momentum for the company, with forecasted earnings and revenue growth rates of around 16% per annum.
However, it's important to note that hardware revenue fell by 15% to $1.2 billion, and services shrank by 10% to $1.0 billion. Budget negotiations in the US had some impact on Oracle's sales, with CEO Larry Ellison acknowledging this factor.
In conclusion, Oracle is attributing its falling revenues partly to a lack of urgency among its salespeople, while cloud revenue growth is driven by large-scale cloud infrastructure deals like the OpenAI data center contract, along with expanding cloud applications and platform services focused on AI and enterprise digital transformation. Despite these challenges, Oracle continues to show strong momentum in its cloud services.
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