Mark Moerdler: Thank you so much for taking my question. The top-of-mind questions I’m getting are related to AI in general as you’d expect and were specifically as it relates to Oracle, what the impact of AI will be on OCI Gen 2. Two related parts to the question. The first is the profitability of AI supercomputers and whether if some clients try to tell me, it’s low-calorie, empty-calorie revenue or can you maintain margins as this business grows? And the second part is about the Oracle ecosystem, and is it strong enough that its workloads transition from model training to inferencing and grounding, could AI compute create a revenue air pocket or [is the ecosystem] (ph) strong enough so you don’t have that. Thank you.
Larry Ellison: Well, if you’re — you’re constantly training these models. Keep in mind, you have to bring in new data if you’re in — obviously in the healthcare field, in the legal field, new cases are being judged, new researches being published all the time and for your AI models to be relevant they have to be up-to-date. So it’s not that you train and then do nothing but inferencing thereafter. So you’re training and your inferencing sit right next to each other. As long as we can do this stuff twice as fast as everybody else that’s on the — not just on the training side, that’s also on the inferencing side, then we are going to be half the cost or better. So we think we are going to be very, very competitive across the board whether it’s training or an inferencing.
So we don’t — so we are pretty confident that we’ve got a cost-performance advantages. Again, if you run twice as fast in the cloud, you cost half as much because you pay by the hour. So the performance advantage is really an enormous cost advantage for us. We don’t see that going away anytime soon, and it applies to inferencing as well as well as training. Now as far as GPUs, are GPUs a low-margin business? Not for a 100% automated cloud with very, very low cost. We think, in some cases, our prices for GPU training, which are very profitable by the way, for us, but are often lower — our prices are lower than the cost of other hyperscalers doing the training.
Mark Moerdler: Thank you. That’s very helpful.
Operator: We’ll take our next question from Keith Weiss with Morgan Stanley.
Keith Weiss: Excellent. Thank you, guys, and thank you for taking the question. I wanted to drill in on Cerner, basically, the one-year anniversary of that acquisition. And maybe from Larry, get an update on where we are with modernizing that solution and modernizing that product? And basically then whether Cerner has kind of lived up to your expectations thus far? And then maybe for Safra. If we could dig into the expense synergy side of the equation, you guys have done a great job increasing margins on a year-on-year basis in this quarter, how much is left to go within Cerner and getting that margin profile to match the broader Oracle margin profile?
Larry Ellison: Okay. I’ll talk about the progress on taking the existing Millennium’s Cerner software and moving it to new Millennium. We basically rewriting that software piece at a time by the way. It’s not going to be a big rip and replace it all. There’s a two-phase process with Cerner. The first thing is to get the lift and shift and get the existing system hardened, which we’ve done and moving the customers to the cloud, which we are in the process of moving everybody to the cloud. That will give them better performance, better security and new features will then start showing up with the system. And so there’s a two-phase shift to the cloud, we are well on our way. The next is replace feature after feature after feature of the older Cerner system with a new Cerner system, new Millennium, which we are not coding in Java, like we usually do.
The new Cerner system is being generated, as you know, generative AI generates code. We have an application generator called APEX. And we are not writing code for the new Cerner. We are generating that code in APEX, and it’s going extremely well. Again, one of the great things about code generators is they don’t make mistakes. Well, either they make the same mistake over and over again or once you fix the mistake, you fix it everywhere. So the code gen — we are using a code generator, and to write the new features in Cerner and it’s coming along very, very nicely. Also on the business side of things, we — again, we think that Cerner business is going to get stronger and stronger again, Safra made the point. The old Cerner business you’d sell licenses.
You sell a big contract and you get a big chunk of revenue in that quarter. Our new business model, as you know is cloud, so we get a big Cerner award and we get that money now over time rather than all upfront. So that’s, if you will, a bit of a revenue headwind, but the Cerner business is doing extraordinarily well.
Safra Catz: And on the expense side, we still have a ways to go, but I think it will become more obvious to you next quarter the changes we’ve made, as they play out through the income statement more clearly. And so you’ll have a better comparison, Q2 to Q2, which will be a full non-deal quarter for you to look at. But you know us, we are always looking to save as much as we can, and to spend as little while still really transforming Cerner into a modern system in its entirety.
Larry Ellison: Let me let me just reinforce what Safra just said. We love to save money. One of the things we did with our data centers is we automated them. We — what we saved labor costs and we saved — we have better security and better reliability because we eliminated human error. With Cerner, the rewrite of Cerner, it’s not armies of programmers that are going be rewriting this. We are generating the new Millennium software using APEX. And that’s also going to save us a lot of human labor and generate higher quality code and higher quality user interfaces and better security all at once.
Keith Weiss: Helpful. Thank you, guys.
Operator: We will take our last question from John DiFucci with Guggenheim.
John DiFucci: Thank you. My question is for Safra, I think. Safra, if the organic constant currency cloud growth was in line with what you did last year and what you want to do for this year at 29%, while license, though it was a difficult comp it was a bit weaker, at least than the street was expecting. And I also — we also realize that cloud revenue for the same amount of business booked will be a lot less than the equivalent license revenue in the quarter. But does this mean we are seeing a move with stronger momentum to the cloud this quarter than we have seen? And I guess just to clarify, given your guidance for the second quarter, you said you’re maintaining your longer-term. Safra, I just wanted to clarify. Are you maintaining your constant currency organic cloud guidance for the year?
