Larry Ellison has banner year as Oracle gains most since dot-com boom

It was a good year for Larry Ellison.

from Oracle The co-founder gained an estimated $75 billion in paper wealth as the software company he started in 1979 saw its biggest stock rally since 1999 and the dot-com boom.

As the S&P 500 Index gained 27% in 2024, Oracle shares soared 63%, bringing Ellison’s net worth to more than $217 billion, according to Forbesbehind only Tesla CEO Elon Musk And Amazon founder Jeff Bezos among the richest people in the world.

At 80, Ellison is an older person in the tech sector, where his fellow billionaire founders are typically several decades younger. Meta CEO Mark Zuckerbergwhose net worth also topped $200 billion, is half his age.

But Ellison has found the fountain of youth both personally and professionally. After being divorced several times, Ellison was reported this month for being involved with a 33-year-old woman. And at a meeting with analysts in Las Vegas in September, Ellison was more engaged than ever, casually mentioning that the night before he and his son were having dinner with his good friend Musk, who advises President-elect Donald Trump (then republican) candidate) running Tesla and his other businesses.

Its big financial boon came from Oracle, which rode its way into the artificial intelligence craze with its cloud infrastructure technology and made its databases more accessible.

ChatGPT creator OpenAI said in June that it would use Oracle’s cloud infrastructure. Earlier this month, Oracle said he had also taken over the business of Meta.

Startups, who often opt for the market leader Amazon Web services, when choosing a cloud, also turned to Oracle. Last year, video generation startup Genmo built a system to train an AI model with Nvidia graphics processing units (GPUs) in Oracle’s cloud, CEO Paras Jain said. Genmo now relies on the Oracle cloud to produce videos based on prompts users enter on its website.

“Oracle has produced a product that is different from what you can get elsewhere with GPU computing,” Jain said. The company offers “bare metal” computers that can sometimes offer better performance than architectures using server virtualization, he said.

In his latest earnings report Earlier this month, Oracle fell short of analyst estimates and issued a forecast that was also weaker than Wall Street expected. The stock had its worst day of 2024, falling nearly 7% and eating away the year’s gains.

Still, Ellison was optimistic about the future.

“Oracle Cloud Infrastructure powers many of the world’s most important generative AI models because we are faster and less expensive than other clouds,” Ellison said in the results release.

For the current fiscal year, which ends in May, Oracle is expected to report revenue growth of around 10%, which would mark its second strongest year of expansion since 2011.

Jain said that when Genmo encounters challenges, it communicates with Oracle sales managers and engineers through a Slack channel. The collaboration resulted in better reliability and performance, he said. He said Oracle is working with Genmo to ensure developers can launch the startup’s open source Mochi video generator on Oracle’s cloud hardware with a single click.

“Oracle was also more competitive on price than these large hyperscalers,” Jain said.

Three months before its December earnings report, at the analyst meeting in Las Vegas, Oracle gave an optimistic outlook for the next three years. Executive Vice President Doug Kehring said the company would generate more than $66 billion in revenue in fiscal 2026, and more than 104 billion dollars in fiscal 2029. The numbers suggest an acceleration, with a compound annual growth rate of more than 16%, up from 9% in fiscal 2029. last quarter.

After Kehring and CEO Safra Catz spoke, it was Ellison’s turn. The president, chief technology officer and largest shareholder of the company took the stage wearing a black sweater and jeans, greeted the analysts, licked his lips and sat down. For the next 74 minutes, he answered questions from seven analysts.

“Did he say $104 billion?” said Ellison, referring to Kehring’s projection. Some in the crowd laughed. “It’s going to be so easy. It’s kind of crazy.”

Oracle’s revenue in fiscal 2023 was just under $50 billion.

This new target impressed Eric Lynch, managing director of Scharf Investments, who held $167 million in Oracle shares at the end of September.

“For a company that’s been in the single digits for a decade, it’s incredible,” Lynch told CNBC in an interview.

Oracle is still far behind when it comes to cloud infrastructure. In 2023, Amazon controlled 39% of the market share, followed by Microsoft with 23% and Google at 8.2%, according to industry researcher Gartner. That left Oracle with 1.4%.

But in the field of database software, Oracle remains a pillar. Gartner estimates the company to have a 17% market share in database management systems in 2023.

Ellison’s challenge is finding opportunities to expand.

Last year he visited Microsoft headquarters in Redmond Washington, to first announce a partnership that would allow organizations to use Oracle’s database through Microsoft’s Azure cloud. Microsoft has even installed Oracle hardware in its data centers.

In June, Oracle deployed a similar ad with Google. Then, in September, Oracle finally partnered with Amazon, presentation of its database on AWS.

Oracle and Amazon have been trading barbs for years. AWS introduced a database called Aurora in 2014 and Amazon has been working hard to move away from Oracle. Following a CNBC Report on effort, Ellison expressed doubts on Amazon’s ability to achieve its goal. But the project succeeded.

In 2019, Amazon released a blog post titled “Migration Complete – Amazon Consumer Business Just Disabled Its Final Oracle Database.”

Ellison revisited the history between the two companies during the September analyst meeting.

“I’ve gotten some pretty cute comments about Amazon using Oracle, not using AWS, blah, blah,” he said. “And it hurt some people. I probably shouldn’t have said it.”

He said a friend at a large New York bank asked him to make sure the Oracle database ran on AWS.

“I said, ‘Great. That makes sense to me,'” Ellison said.

The multi-cloud strategy should help gain market share in databases, said analyst Siti Panigrahi of Mizuho, ​​who has the equivalent of a buy rating on Oracle shares. AI-related cloud deals will also help Oracle deliver on its promise of faster revenue growth, he said.

“Oracle now has an end-to-end stack for companies to build their AI strategy,” said Panigrahi, who worked on applications at Oracle in the 2000s.

So far, Oracle has mainly made high-value AI deals with OpenAI and Musk’s X.ai. Of Oracle’s remaining $97 billion in performance obligations, or revenue that has yet to be recognized, 40 or 50 percent is tied to GPU leasing, Panigrahi said.

Oracle did not respond to a request for comment.

Panigrahi predicts that more companies will begin to adopt AI, which will be a boon for Oracle given its hundreds of thousands of large customers.

There’s also promise in Oracle Health, the segment formed from the company’s $28.2 billion acquisition of electronic health records software provider Cerner in 2022.

Unlike its rival Epic, Oracle Health lost market share in the United States in 2023, according to estimates from KLAS search. But Ellison’s ties to Musk, who is expected to co-lead Trump’s Department of Government Efficiency, could benefit Oracle Health “if there was a greater push toward modernizing existing health systems,” the researchers said. Evercore analysts in a note last week. They recommend buying the stock.

For now, Oracle is busy using AI to rewrite Cerner’s entire codebase, Ellison said at the analyst event.

“It’s another pillar of growth,” he said. “I think you haven’t really seen it yet.”

Hours earlier, Ellison had called Marc Benioff, co-founder and CEO of Sales force. Benioff knows Ellison as well as anyone, having worked for him for 13 years before starting the cloud software company that is now a major competitor.

“It was great,” Benioff said in a lengthy interview the next day, about his conversation with Ellison.

Benioff opened up about his former boss’ latest fortune.

“Larry wants it really bad,” Benioff said. “It’s very important to him to build a great company, what he considers to be one of the most important companies in the world, and also wealth is very important to him.”

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