Earnings Roundup and More on Sovereign Cloud – Infrastructure Matters, Episode 43

Hello everyone. Welcome to episode 43 of Infrastructure Matters. I'm Krista Macu and I'm joined this week with both of my co-host, Kimberly Bates in Stephen Dickens, Kimberly and Steven.

How are you today? Good. It's getting the gang Back together.

We Haven't been all through this In a while. I know. It's true.

It's between travel and everybody's schedules are, it's that time of the year, right? It's crazy. Yep.

Yep. So With Kimberly A. Little bit this week though, we seem to have been on a bunch of calls, which always makes me happy.

Yeah. Little things that make you happy. Very Course with Kimberly is always a highlight of my day.

Yeah, Right. Yeah. There we go.

Okay. She's not gonna reciprocate. She's just gonna let that one fly.

Oh, Steve, we love you. We love you dearly. My brother.

My brother in crime and technology. So yeah, I mean, no brothers and sisters argue, right? Yeah.

Kimberly, I described Kimberly, two of my friends out there that ever see us exchange a little bit there. Yeah, We've had a few testy, you know, we cut across each each Other, but wey feisty, not testy, feisty. My sister from another.

Take control of this. Otherwise it won't down there. You're the lead on this one.

I know. So with that, um, Steven, I know you had, you know, quite a few things this week you wanted to go over. Um, you know, I think first started starting by looking at MongoDB, so why don't we kind of just jump in on that.

Yeah, so basically week for earnings, still seeing the sort of tail end of earnings come through. Um, so MongoDB announced earnings top line revenue up 22%. I think we're starting to see these guys see AI come through into their numbers.

Um, strong a RR growth, which was good. Um, I think, you know, revenue increasing up here to, what was it, 450 million? Um, strong, strong growth.

I mean, I think the way I'd contextualize this, and I'm literally writing an earnings note as we speak, um, 'cause they announced earnings last night and I was at our customer appreciation event. So it's kind of scramble into it and then jump on this call. I think the way I contextualize sort of the strong momentum is people are starting to reimagine their data stack for the tsunami tsunami of apps that are coming through ai and you're starting to see that, you know, really good conversations with Oracle in this space as well.

You know, so that what was probably, I don't wanna say a sleepy market in the, in the database space. 'cause obviously Mongo has been, um, disrupting that for a few years. But I think that was a kind of normal trajectory of new fast moving entrant coming in, disrupting somebody like an Oracle.

I think if I look at it now, we're gonna see that whole stack kind of be reimagined as AI drives some kind of pulls that along and Mongo's well placed for that. So, I mean, that's the way I'm looking at the earnings. You know, I do not understand the equities guys at all 'cause the stock is down this morning, but they seem to beat across the board from what I could tell, whether that's just bad timing from being a tech stock with the market sort of hitting a, hitting an a sort of pause right Now, I, as I say, I, I never understand the equities guys and what happens the day after earnings get announced.

Maybe that's why I'm doing this and not picking stocks, but I know that's why I'm doing it. Yeah, yeah. I can understand the technology.

I, I try and look at the markets and I'm like, none of this makes sense, but I mean strong set of numbers from MongoDB and a consistent trend. Yeah, Yeah, yeah. No, that makes a lot of sense.

And I think the, you know, the comment regarding AI and sort of how databases, how the requirements are shifting there, you know, I think of course we're obviously certainly seeing that as AI applications start to be used more frequently, um, you know, by enterprises and you know, your comment regarding the A RRI know the companies that I've been covering, you know, that's, I think, you know, a key metric we're really starting to look at across the technology space as we start to see some of these new delivery models. So certainly makes sense from my perspective. Yeah, I always look at two things, a RR growth and then large customer growth within the numbers.

So if you are growing your a RR, that's good, but you could be getting that from a bunch of small clients. If I see that growing and I see the percentage of all the, some vendors do it a percentage of revenue from lot clients above a particular size. Some of them do it of, you know, revenue for deals over clients over a hundred K or 250 K.

There is no consistent measure of what's our big client for a vendor, but they are consistent quarter to quarter mentioning that number. So I look for that trend as well, you know? Mm-Hmm.

And then we've obviously got rule of 40 growth as a kind of north star, but if you're looking for those sort of three things, that's a pretty good way of looking. As I say, I don't know what the equities guys look at, but that's what I'm tending to be looking at. Oh, yeah, absolutely.

Makes sense. So why don't we continue our earnings tour. Um, Kimberly, I know you looked at both NetApp and Pure, um, over the past week from an earnings perspective, correct?

Yeah, so, um, I'll take on Pierce since they were the first ones out the door, and if you would allow me to kind of take a look at my notes, wherever my notes are there. They're, um, just, uh, revenue, um, was up, um, about a double digit revenue growth. Um, they hit a hit a number of 6 93 or, um, which was below where they expected to be.

Um, in terms of their, their areas they are doing, you know, the revenue and subscriptions, um, is, is good, although it had a bit of a slow, slow down, um, a little bit less than what they expected. I don't know if that's they're saturating the market or not. Um, I'm gonna be curious to see, you know, we see that trending and people are that that subscription, but as a service kind of take capability, um, how they absorb it.

You know, there's customers that really like the CapEx strategy. Um, there's customers that really like the storage as a service strategy. So where we will see where that balances out over time.

Um, and, and know there's certain companies that are, you know, heavy down on that kind of space. But I think there needs to be a blend in the strategy there, as we would expect. Um, they are very focused on the AI workload demands, although, um, as I think Charlie had said, Charlie and Gcar, Giancarlo had said, while they're seeing, um, some evidence of the AI workload demands, it hasn't done this huge uptick that we might have.

We've seen in the server environment and probably starting also in the, the, the network environment, it's still kind of like, you know, it's getting there, but it's hasn't really kicked in. And that's kind of consistent with what we're hearing from some other PE people in the market space. Um, what I will comment on is, um, where they see there, there's two areas that, that Charlie is seeing some big areas for the ai and that is one in the, uh, large public or private GPU farms where they're setting up these big areas.

And I know we just, we've talked to Lenovo and they're definitely focused on that face pace place. The second area is the, um, inference engine and the rag environments. Um, and again, for mo, most of the companies, the inference engine market seems to be where they, where we all are looking to say, okay, so after we get all this training, then we gotta deploy it, we're deploying it at the edge, we're deploying it at every retail store, every supermarket, every mining area, et cetera.

So that's where the big uptick will be. Um, a couple of other items. And, uh, flash Blade had a good, good Q1, um, which was also including AI workloads.

Um, so that's good to see that that's continuing to uptick and they're doubling down on their, um, high capacity QLC system, which is growing significantly and it's taking, I'm sure what it's doing is taking out more of the HDD market that's out there as well. So I will pause there because otherwise I'm gonna be like boring people here if I just keep on rolling through all of this and see if there's any questions or any comments from anybody. Yeah, I think, um, you know, as you're alluding to Kimberly, I think a lot, you know, a lot of components at play.

I think for me personally, your comments on Flash Blade, you know, always are interesting. You know, as I kind of tend to look at those protection environments, I'm still catching up on Pure's earnings. Did they mention anything around Port Works?

Um, or sort of kind of the container, you know, kind of protection play there. That's one thing that I've been, you know, trying to keep an eye on myself. It's mostly been focused completely on the, the other core areas.

Mm-Hmm. That, that's there not a whole lot on the port works, or I not grabbing one right now off the top of my head, so I can't comment on that. That makes sense.

Um, on, on the, the NetApp side, um, they did exceed the midpoint of their guidance, although year over year they're, there's, they were slightly down just like a 1%, but quarter over quarter they're up 6%, which is good. Um, their focus, and this is kind of a similar trend I'm seeing coming out of the other other vendors, which is a very, a heavy focus on platform. And they saw one of the nice things about NetApp is cited a couple wins based upon platform.

Um, in particular, there was one very large customer that they went into that was going to be buying block and file two separate vendors, two separate environments, and they have bought all of it from one vendor. Um, and that is because there's a platform approach. And what I mean by platform approach is that there's the ui, the, the infrastructure, um, user interface infrastructure enables them to manage both those environments.

And then for NetApp, there's definitely some synergies between those two kind of technologies where they can, within their snapshot capability, their data protection capabilities that they have for the system. So that's a pretty powerful play play. We're seeing that same theme coming out of the other companies particularly.

You see that out of kind of pure, pure talking about their purity software and being that single platform piece. Um, what that does is it streamlines the operational, you know, pressures that are on the client, um, on the, on the customer base and, and helps them through, you know, what we're doing right now is not enough staff to do the things you wanna do. Um, we saw one of the things they highlight at NetApp was their abil their storage as a service offering had an uptick up until this time they've kind of been quiet about it.

Um, but this has, sif definitely has seen an uptick with them. So I think they've got plenty of room to grow within their client base to penetrate, um, in terms of offering the service, which is, uh, you know, the using it by the bite, the gigabyte by the bite kind of thing. Um, they too, like everybody else, um, really hammered down about where, where they are with their AI space.

One of the values, the big competitive positions that they highlight is there they are, you know, the largest file system that's out there. You know, they were the original guys that were out there as network file system. So they've got this very strong play in that space.

So they do have the ability to go in there and say to the customers, oh, we have this, let's expand this out into the other use cases or the other environments, you already know us, you already trust us. Um, which is a powerful play as opposed to a competitive win where you gotta take it out and convert and all that kind of stuff. So we'll see how that competitive game plan pans out.

Um, I saw that Just on the, just on the file system stuff, I saw a really great demo of NetApp with Vertex from Google. Exactly. On that plan.

It would, it stood out for me. I've had hundreds of demos over the last sort of year on ai. It seemed that one of the simplest ways to untap and tap into your corpus of data that's in your storage systems today, all of this file information and put that up to a large language model and be able to have it run off your data in a private environment, rather than have to put some, like, move that data to the cloud to then put it in a cloud-based LLM model.

So I'm with you there, Kimberly. That makes a lot of sense for me. And I think given where they are from a file perspective and the file service space, that's, that's as we start to see AI get deployed more in enterprises and private deployments, I think that might be an interesting dynamic to watch.

Yeah. And there's gonna be a trade off of performance Mm-Hmm. To when I'm familiar with the capabilities scale, um, all those will come to play.

Um, also price, we can see the last Just little minor thing that often matters, right? How much does it cost? And it just depends upon how big this data's gonna end up getting Yeah.

Um, that we have out there. But I mean, bring the AI to the data rather than taking the data to the AI is depend on being more and more. So I think given that the amount of file data that NetApps have got, that, that's, that's pretty important I think.

Yeah. And he also said we're just, and George K and also talked about how we're only in the beginning stages of this. So His brother might disagree though.

What do you think on the, on the two angles of that? Well, well, I mean, if you read them through, there's, there's some similar threads that you see along those. And since we're sitting the, on these guys back to back, it's kinda like, okay, I heard that one.

Okay, I heard that one there. Let's match these. There's a line here.

The last thing I, you can take it all to the Google cloud. The other brother wants you to keep it all on-prem on a NetApp file, which one's gonna work? There you go.

The last last one I'll mention is, um, we've heard, uh, again, um, they're seeing several environments where customers are looking at their hyper-converged VMware landscape, um, looking to optimize their VMware licenses and are using, uh, coming in. So that what they're coming into with is their C-series, which is their QLC, um, the QLC device, which is a, it's not a lower end device, it's just, it's, well, yeah, it's would be a lower end than a TLC kind of environment in terms of pro possible performance, but this new system comes in there as a very cost performer. Um, and so this, you know, again, okay, so they're saying that everybody else we're talking to, okay, here's the PS services for VMware conversion.

Here's the Nutanix strategy, here's the Dell strategy, here's the HPE strategy, okay, Hawk, we'll see what you're gonna end up doing. But at the end of the year Right. Optimize your VMware licenses, his code for a lot of things, You know, and I, I, and I think he's perfect.

I I also actually really believe that Hawk is perfectly fine with seeing this optimization going on. So this is, uh, it's not that he didn't see this coming. This is, this is no new news to him.

So anyway, with that, I will turn it back to the, the lovely Krista to go to the next one. Yeah. I think we have a couple more earnings, believe it or not.

I know, um, Lenovo, right? Steven, I know was one you were kind of talking about before we, before we hit record here. Yeah.

So Kimberly and I literally just came off of Colonel with Kirk Gogan, who's the SVP over there responsible for infrastructure. Always look forward to those calls. Kirk is one of the best and the bright.

Okay. Can I say storage again? You can say storage.

Take it off me. Go for it. Okay.

I'm, I'm gonna say two things about storage. For those that don't know, they are number one in the entry market and they're number three in worldwide market for storage in terms of the revenues according to IDC. So, mm-Hmm.

Turn it over to you. There you go. Because people don't realize that.

Well yeah. They don't realize that're, I mean, take that up one level and agree. I mean, the mix of non PC revenue, you know, 45% non pc.

I think a lot of people think of Lenovo as a PC company. That's where they started. I don't think people are giving them the credit of where they are from a perspective around their enterprise space.

Kirk does a fantastic job. We just got a 45 minute sort of master class in and senior exec knowing their numbers. You know, I think for me, Kimberly hit it really well.

Storage, I see these on the guys on a path to getting to number two. How they do that. They're gonna have to invest in the marketing.

They're gonna have to double down, see some really good things with their one Lenovo strategy around how they're investing in their sales force to be able to sell the complete mix. So I think, you know, obviously A IPC is starting as a mega trend, so that's gonna be interesting to see that come through. I think we're early days on that, you know, we're starting to see a lot of innovation from Qualcomm and, and Broadcom and another players kind of in that ecosystem.

So that's gonna be really interesting. One of the things that also stood out from our conversation, fastest growing Android phone, you know, the flip phones, the Motorola razor is back. So, you know, Kirk's not the, the expert on that, that's other people in his business.

But you know, he, you, his face lit up when he talked about that. I think He's obviously very proud of their position. Yeah.

Yeah. I Mean, you know, they, they talk about pocket to cloud and we spent a whole bunch of time, we didn't talk about motor roller racer. There's other people in our team that covers that.

You know, Olivier Blanchard is the guy. So I wrote the coverage note with him on that because he covers the sort of PC and devices. But I think the other interesting piece, and I'd love to get your perspective 'cause we haven't had a chance to chat, it was literally just before this, that whole ODM versus OEM dynamic Lenovo is a ODM provider into cloud companies.

You know, so they're providing into the Microsoft Azure stack, you know, they're providing into Amazon AWS, they're going into Google, they're going into Alibaba, all these guys as an ODM provider, and then they obviously sell to enterprises as an OEM provider. Dell and HPE don't do that Well. Well, the No, well, too much.

So HPE got outta that business. Yeah, yeah, yeah. They got outta the business because it is a very low margin business, and you have to have this gets it back into, you know, what are you doing?

And if you are in a high touch business providing services, doing what HPE does, that's too difficult to manage. Those are two different types of companies Mm-Hmm. That you're managing through.

Mm-Hmm. Novo has got the chops to do that because that is what they're designed to do. Yeah.

You know, if you look at that, you know, they, they're, they're, their storage business is not a necessarily, they haven't developed the storage software. What they are doing is they are selling others peoples, but they're extremely good at doing what they're doing and getting it to the market. So you can almost look at this company as this manufacturing engine.

A lot of intel people are over there, right. Manufacturing engine, that's PCs, devices, servers, et cetera, that can customize at scale. Mm-Hmm.

And they are a, a big distribution company, you know, because they're a hundred percent channel focused. They, that's what they do. And they know how to do this and they know how to do customs.

So if you look at what's going on their HBC side of the house, you mean a lot of that when you're, you're building out for big, um, research, um, facility, those, that's all custom kind of work. So they know how to do this and they know how to do this at scale. And then that goes into what he was talking about in terms of all their investments in, in different countries you've been over to.

They just announced the big re relationship that they're gonna have with, you know, these Saudi, the Crown Prince Saudi Arabia, they're gonna be putting a, you know, they're gonna build, you know, a plant there for manufacturing. They're gonna move their headquarters to Riyadh. I mean, it's, this is all very big investments they're making, but it's investments on a, what they do and do really well, which is that manufacturing side of the house.

Well, I mean, the one data point that stood out for me, 600 motherboard engineers, yes. I mean, that's not a tiny team. That's a big team going after design wins.

You know, that's significant investment with a MD and Intel. You know, they're doing the, as as Kimberly said, these custom systems for the cloud providers. That's a moat.

You know, if you are a HPE or a Dell or a super micro to just getting the 600 smart people to come and join your team to give you that capability, it's not something you can build in a moment's notice. So, really impressed. I always come off buzzing after my calls with Kirk, the, the guy's just a, a masterclass in knowing the, where the business is going, having the numbers at his fingertips.

So always come away press from those calls with Lenova. Absolutely. Absolutely.

So I know we had a couple other things you wanted to touch on quickly. Um, you know, Steven, that you brought up on being Elastic, um, yes. If you wanna pivot Yep.

Yeah. Run fast through Elastic again. Another one that dropped last night.

So trying to sort of get that through. Again, one of the key metrics here was annual contract value. Elastic tracks that it deals over a hundred KK, um, they've now got 1,330 customers spending more than a hundred K with them annually.

I think given where they're as an open source company, you know, that's interesting. Um, elastic Cloud revenue topped 148 million in Q4. That's a 32% Euro year increase.

So, Mm-Hmm. Some high level metrics there. This company's really well placed.

There's three areas that the Elastic focuses on. They're focused on the security space, they're focused on AI and they're focused on observability. All those markets are growing, you know, so not the, you know, not a super big name Ash Kearney's doing a great job.

They're as CEO of getting out and trying to tell that story. Mm-Hmm. Daniel on, um, making markets a couple of times talking about earnings.

I've spoken to, I think, You know, I did a video with them at RSA as well a couple weeks ago. Yeah. So they're doing a good job of getting the story out.

I think for me, being exposed to those three markets that are growing so quickly, if they can get their stories straight and continue as they are on getting that message out, I mean, there's work to do, um, Mm-Hmm. You know, on sort of profitability. But I, I, I think overall I'm sort of bullish, but as, again, I'm not an equities guy.

I just look at the technology trends and kind of where they're exposed. I think they're in good shape. Yeah, no, I agree.

I mean, I'm very positive in terms of what they're doing in the Security Operations Center, um, and how they're really kind of positioning against some of these traditional SIM tools. So I would, uh, definitely agree with you Steven. Yeah.

Um, I need to check out your video. You need to send me that offline. I didn't see that one.

Yeah, yeah. Yeah. We'll definitely, we'll include that in the show notes for sure.

As well as well. And I know we have maybe two minutes we can do a quick drive by, um, regarding Oracle Cloud infrastructure in Morocco. Um, I know Steven, that was one more item you wanted to touch on today.

Yeah. Another one, another announcement for Sovereign Cloud. Uh, and just keep seeing this trend.

Uh, we've had AWS in Japan, we've had Oracle in Japan, we've had IBM in Canada. We've now got OCI in Morocco. The interesting one for me is this is the first cloud provider in North Africa.

Mm-Hmm. So don't often hear about the cloud providers investing in Africa. You know, we just heard about Lenovo investing in Middle East, but we don't often hear about Africa.

So good to, good to see that. Just from a geopolitical point of view, I'm always a big fan, you know, investing in other parts of the world, but in, I'm really tra really interested with what Oracle's doing around Sovereign Cloud. I think what they're doing with Alloy, what they've got with cloud at customer, some interesting stuff.

So I'm kind of, I'm trying to get a, a more detailed briefing out of the guys on Oracle because there's a thread there that I wanna pull on around what they're doing in Sovereign Cloud. Yeah. Perfect.

Alright, and with that, we are officially out of time. Um, Kimberly, Steven, thank you. It's always a great way to, uh, kind of kick off our, our Friday here and wrap, wrap up the week.

Um, and thank you to our listeners. Make sure that you like and subscribe so you don't miss any, um, future episodes. We're here recording, um, every single week.

Um, and thank you again, and we look forward to seeing you on the next episode.