AI stimulates the "back-end management system" super cycle: first SAP, now Oracle

Morgan Stanley analysts believe that Oracle's strong financial report indicates that the back-office supercycle is expanding from the SAP ecosystem to the broader ERP cloud market.

According to news from the Chasing Wind Trading Desk, Morgan Stanley analysts stated in a report on June 12 that AI is becoming a strong catalyst for upgrading enterprise back-office systems.

Previous financial reports show that Oracle's performance in the fourth quarter of fiscal year 2025 exceeded expectations, particularly excelling in SaaS cloud applications. Fusion ERP's year-on-year growth accelerated from 18% to 22%, an increase of 4 percentage points; NetSuite ERP's year-on-year growth improved from 17% to 18%, a growth of 1 percentage point. Management expects the growth rate of cloud applications to accelerate further in fiscal year 2026.

Oracle CEO Safra Catz emphasized during the earnings call that the demand for AI capabilities is driving customers to upgrade from on-premises products to the cloud, as all AI functionalities are only available in the cloud. This echoes similar dynamics mentioned by SAP CEO Christian Klein during the first-quarter earnings call.

Morgan Stanley believes that Oracle's financial report indicates that the back-office supercycle is expanding from the SAP ecosystem to the broader ERP market.

Historically, SAP has been in a leading position in the back-office supercycle due to its more aggressive cloud migration strategy with the termination of support in 2027 (which will not maintain old systems). This momentum is reflected in the accelerated growth of SAP's current cloud backlog orders. In contrast, Oracle's Fusion and NetSuite businesses have only recently seen similar acceleration in growth.

Morgan Stanley's CIO survey data shows that leveraging AI capabilities is the main catalyst driving chief information officers to upgrade ERP platforms to the cloud. Specific survey results indicate: digital transformation accounts for 82%, achieving higher operational efficiency/cost savings through replacing traditional processes accounts for 61%, leveraging AI capabilities accounts for 48%, and local vendor lifecycle deadlines account for 34%.

This research result is highly consistent with the observations of Oracle's management, confirming that AI demand is becoming an important driving factor for ERP cloud migration. The increasing mentions of "ERP upgrade" during the company's earnings call indirectly validate the sustained growth in market demand for ERP system upgrades.

The statement from Oracle's CEO during the earnings call further confirms:

Customers are seeing strong performance from our strategic SaaS products... The reality is that AI capabilities can only be utilized in the cloud.

Many customers are still using on-premises ERP products, which cannot truly leverage advanced intelligent agents and AI capabilities. To automate and achieve cost reduction and efficiency improvement with these features, migration to Fusion or NetSuite is necessary.

This statement clearly outlines the AI-driven trend of ERP cloud migration, bringing clear growth opportunities for related software service companies