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Is Oracle the Underdog of the Cloud in 2025? Don't Underestimate the Database Giant.
Oracle's cloud strategy is a multi-faceted gem, glittering with database prowess, AI initiatives, and a unique multicloud dance. Will it be enough to snatch the crown from the Big Three hyperscalers?
Key Highlights:
- Oracle Cloud Infrastructure (OCI) is blossoming, boosting impressive growth rates exceeding 50% year over year. Momentum is building.
- The company's dedication to performance, competitive pricing, and database services forms the bedrock of its cloud strategy. This is classic Oracle.
- Oracle's multicloud strategy, exemplified by partnerships with AWS, Azure, and Google Cloud, is a unique differentiator. Coopetition not competition?
- Oracle and NVIDIA have expanded their partnership to deliver comprehensive AI solutions, including powerful cloud infrastructure, sovereign AI capabilities, and a wide range of AI software and services, solidifying their position as leaders in the AI landscape.
- While Oracle trails behind other hyperscalers in market share, its specialized focus and aggressive expansion signal a promising future. The sleeping giant awakens.
Analyst Take:
Oracle's cloud journey over the last few quarters has been nothing short of fascinating. While AWS, Azure, and Google Cloud have been dominating the cloud landscape, grabbing headlines and shouting from the rooftops, Oracle has been quietly, yet steadily, building its own cloud empire posting growth numbers that surpass its competitors. Like a master chess player, they've been strategically planning their moves, and now, Oracle Cloud Infrastructure (OCI) is showing signs of becoming a formidable force in the industry.
OCI's growth has been remarkable, exceeding 50% year over year. This impressive growth is fueled by Oracle's strategic focus on performance, competitive pricing, and its crown jewel: database services. While they may have been late to the public cloud party, they have showed up in style of late. The Oracle Database, Oracle Autonomous Database, and Oracle Exadata have long been the gold standard in the database world, renowned for their reliability, scalability, and highly tuned performance. Their integration into OCI has proven to be a winning formula, attracting enterprises who demand the best for their mission-critical applications.
But Oracle isn't just relying on its database prowess. Recognizing the evolving needs of modern businesses, the company has been aggressively expanding its service offerings. OCI boasts a comprehensive suite of cloud services, adding AI, machine learning, and high-performance computing capabilities to its arsenal. This expansion is aimed at capturing a wider range of cloud workloads, from data analytics and AI model training to enterprise applications and edge computing. In addition, Oracle Fusion Cloud Applications already count more than 50 integrated AI agents that customers can use within their business apps. By broadening its portfolio, Oracle aims to attract a broader customer base and position OCI as a true one-stop shop for cloud services.
One of Oracle's most intriguing, and perhaps unexpected strategy is its embrace of multicloud. While AWS, Azure, and Google Cloud are primarily focused on building their own walled gardens, vying for customer loyalty within their ecosystems, Oracle has taken a different approach. The company has forged partnerships with its rivals, offering its database services running on OCI and Exadata in their data centers through offerings like Oracle Database@AWS, Oracle Database@Azure, and Oracle Database@Google Cloud. This multicloud strategy is a shrewd move, recognizing the reality that many enterprises are adopting a hybrid or multicloud approach and already built applications around services in those clouds. By meeting customers where they are, Oracle is demonstrating a willingness to play nice in the sandbox, positioning itself as the Switzerland of the cloud.
The Data Gravity Paradox: AI in the Cloud vs. AI in the Enterprise
The rise of AI presents a compelling paradox for enterprises. To leverage the power of AI, organizations need access to robust AI services, infrastructure, and data. While services and infrastructure are often readily available in public clouds like AWS, Azure, and Google Cloud, which have invested heavily in AI capabilities., migrating massive datasets to the cloud can be costly, time-consuming, and fraught with security and compliance concerns. This creates a "data gravity" effect, where the sheer volume of data makes it impractical to move.
So, what's an enterprise to do? Bring the AI to the data, or bring the data to the AI?
Traditionally, enterprises have faced a difficult choice:
Option 1: Migrate data to the cloud. This offers access to cutting-edge AI services but incurs costs and risks associated with data movement and cloud dependency.
Option 2: Build AI infrastructure on-premises. This keeps data within the enterprise but requires significant investment in hardware, software, and expertise.
Oracle's strategy offers a compelling third option, addressing this paradox head-on. By deploying OCI within other hyperscalers' data centers (Oracle Database@AWS, Oracle Database@Azure, Oracle Database@Google Cloud), Oracle provides a unique solution bringing AI to data:
AI capabilities within familiar environments: Enterprises can leverage the hyperscaler’s AI services and infrastructure they may already be using, accessing data in Oracle Database and the powerful Exadata X11M platform, within the hyperscaler environments. This eliminates the need for costly data migration.
Reduced latency and improved performance: Oracle Database running on OCI within the hyperscalers' data centers minimizes latency, enabling faster data processing, and AI model training.
Enhanced security and compliance: Data remains within the hyperscaler's secure environment, adhering to existing compliance requirements.
Simplified management: Oracle manages the underlying OCI infrastructure and database services, reducing the burden on enterprise IT teams.
This approach allows enterprises to have their cake and eat it too. They can access Oracle's advanced AI capabilities without sacrificing the benefits of keeping their data within a familiar and compliant cloud environment. By bridging the gap between on-premises and public cloud, Oracle is offering a compelling solution to the data gravity paradox, enabling enterprises to unlock the full potential of AI without compromising on data security, performance, or cost efficiency.
Oracle and NVIDIA: A Powerful Partnership for AI
Oracle and NVIDIA have joined forces to become leaders in the rapidly evolving field of AI. Their collaboration focuses on delivering cutting-edge AI solutions, boosting accelerated computing capabilities, and enhancing data processing power. This partnership is reshaping the AI landscape by providing comprehensive solutions that cater to a wide range of needs, from massive AI model training to edge computing. At the core of this collaboration is the deployment of powerful AI infrastructure. Oracle has launched the industry’s first zettascale cloud computing clusters, powered by NVIDIA's advanced Blackwell platform. OCI Supercluster isa massive AI supercomputer capable of scaling up to an incredible 131,072 NVIDIA Blackwell GPUs. This infrastructure provides the necessary foundation for training and deploying the next generation of large-scale AI models.
The partnership also emphasizes delivering sovereign AI solutions worldwide. Governments and businesses can now establish AI factories on their premises or within secure cloud environments, ensuring data security and compliance with national regulations. This is achieved through OCI Dedicated Region, which enables customers to deploy OCI on-premises, as well as Oracle EU Sovereign Cloud, both of which include NVIDIA GPUs and OCI AI services. NVIDIA also offers DGX Cloud on OCI, which includes the deployment of NVIDIA Grace Blackwell across various OCI services.
Oracle is also making significant investments in deploying a wide array of NVIDIA GPUs within its cloud infrastructure. These include the NVIDIA H100 and A100 Tensor Core GPUs, designed for high-performance computing and AI workloads, and the NVIDIA L40S GPU instances, which cater to AI, simulation, and digital twin workloads. Additionally, BlueField-3 DPUs are being used to optimize server efficiency and enhance security.
To further empower its customers, Oracle has integrated NVIDIA AI Enterprise software into its OCI Supercluster. This provides a comprehensive platform for AI development and deployment, featuring tools like NVIDIA NIM for inference microservices, NVIDIA NeMo for building and deploying generative AI models, and NVIDIA CUDA-X microservices for improving AI application performance.
Oracle is leveraging these advancements to build a robust suite of AI-based offerings. OCI Superclusters are central to this strategy, providing the scalable, high-performance computing power needed for complex AI tasks, including training large language models and running real-time inferences. These superclusters support the development of trillion-parameter models, essential for sophisticated generative AI applications.
Oracle is also expanding its AI services to include generative AI capabilities, supported by NVIDIA's technology. This involves creating services where customers can utilize both proprietary and pre-built models for various applications, ranging from intelligent chat systems to professional content creation tools.
Recognizing the growing importance of edge computing, Oracle is committed to supporting AI at the edge. This involves smaller-scale deployments using NVIDIA GPUs on devices like Oracle's Roving Edge Device v2, which can operate in disconnected or remote locations. To make these powerful tools readily accessible, NVIDIA's AI software, including DGX Cloud and NVIDIA AI Enterprise, is available through the Oracle Cloud Marketplace. This simplifies access and deployment, particularly for customers in regulated sectors like government, where security and compliance are paramount.
Oracle's significant investments in NVIDIA chips and its active pursuit of cloud GPU contracts demonstrate its commitment to AI infrastructure as a core driver of its business growth strategy. This collaboration not only strengthens Oracle's cloud capabilities but also positions it as a frontrunner in providing AI infrastructure solutions that meet the diverse needs of its customers.
Hyperscaler Dominance Can Oracle Disrupt the Party?
Despite these strengths, Oracle still faces significant challenges. The cloud market is dominated by ,AWS, Azure and Google Cloud each with their own entrenched customer base and vast resources. Oracle's market share remains relatively small compared to these giants. However, Oracle's specialized focus on performance, its aggressive expansion efforts, and its unique multicloud strategy suggest that the company is well-positioned for further growth. This is a company that knows its strengths, and it's playing to them with laser focus.
Oracle's success in the cloud will also depend on its ability to innovate in the rapidly evolving fields of AI and machine learning. While AWS, Azure, and Google Cloud have already made significant strides in these areas, Oracle is catching up. With offerings like OCI Supercluster for AI model training, Oracle Database 23ai with AI Vector Search, and MySQL HeatWave for integrated analytics and AI, Oracle is demonstrating its commitment to this critical technology. Moreover, Oracle's unique approach of embedding AI directly into its database solutions and business SaaS applications could be a key differentiator in this race. Imagine the power of AI-driven insights derived directly from your core business data. This is the promise that Oracle is bringing to the table.
Looking Ahead
Based on my observations, organizations need to get their data organized first, before they can even hope to begin to pursue a successful AI strategy. Having your data in multiple locations and data silos with pipelines shuffling data back and forth does not bode well for AI training and inferencing. With the advent of Oracle Database 23ai, and the fact that the world’s most critical business data already resides on Oracle databases, positions these organizations to simply upgrade to 23ai and apply AI to their existing business data—rather than trying to set up a separate AI workstream with duplicative data sets and the challenges of maintaining data consistency with the source.
Oracle's multicloud strategy is a game-changer. In a world where enterprises are increasingly embracing hybrid and multicloud environments, Oracle's ability to seamlessly deliver its services across different platforms is a major advantage. This strategy allows Oracle to tap into a wider customer base, sidestepping the limitations of vendor lock-in and offering customers true flexibility and choice. This is a refreshing departure from the often rigid and proprietary approaches of the other hyperscalers.
The key trend that I'll be tracking is Oracle's progress in the AI and machine learning space. While the company has made some promising moves, it still has some catching up to do compared to its hyperscale rivals. Going forward, I'll be closely monitoring how Oracle integrates AI into its services and how it differentiates its AI offerings from the competition. Will Oracle be able to carve out a unique niche in the crowded AI market? Only time will tell.
When you look at the market as a whole, Oracle's cloud strategy is a breath of fresh air. In a world where hyperscalers often seem to be playing a zero-sum game, vying for market dominance at all costs, Oracle is demonstrating that there's room for collaboration and coopetition. This approach could be a key to Oracle's success in the cloud, allowing it to leverage its strengths while also benefiting from the strengths of its partners. It's a win-win for Oracle and its customers.
HyperFRAME will be tracking how Oracle executes on its multicloud strategy and how it performs in the AI and machine learning arena in future quarters. The company's success in these areas will be crucial to its ability to challenge the dominance of the otherhyperscalers and become a major player in the cloud landscape. Don't count Oracle out. This underdog has the potential to become a top dog in the cloud.
Steven Dickens | CEO HyperFRAME Research
Regarded as a luminary at the intersection of technology and business transformation, Steven Dickens is the CEO and Principal Analyst at HyperFRAME Research.
Ranked consistently among the Top 10 Analysts by AR Insights and a contributor to Forbes, Steven's expert perspectives are sought after by tier one media outlets such as The Wall Street Journal and CNBC, and he is a regular on TV networks including the Schwab Network and Bloomberg.