Ovh Groupe SA

PAR:OVH

Earnings Call Analysis

OVHcloud Posts Strong Q3 Growth, Confirms FY23 Targets

OVHcloud delivered a robust Q3 with a 13.2% like-for-like revenue growth, totaling EUR 228 million, a 12.6% increase as reported. Revenue surged above 20% in Public Cloud and grew in the mid-teens for Private Cloud. European operations accelerated sharply, with demand for sovereign solutions boosting OVHcloud's standing as a regional data and IT leader. Alongside financial discipline, the company is capitalizing on product innovation in Platform as a Service (PaaS) and Artificial Intelligence (AI). FY23's guidance remains steadfast with expected revenue growth of 13-14%, an EBITDA margin over 36%, and CapEx at the lower end of EUR 16-20 million for recurring and 28-32% for growth-related expenses.

Growing Partnerships and Digital Sales Drive Expansion

The company has reported growth across its sales channels, with the fastest-growing being the enterprise channel, comprising both direct and indirect sales. The indirect sales, primarily through over 1,350 partners such as Accenture, Capgemini, and Sopra, have been a recent endeavor and are already deemed successful. The digital channel also showed growth despite being more susceptible to macroeconomic conditions, with customers aiming to optimize their spending.

Leading the Charge in European Data Sovereignty

OVHcloud has positioned itself as a leader in data sovereignty in Europe, a sector seeing rising demand due to increased regulatory and public awareness around data privacy concerns. This is exemplified by the tenfold increase in revenue from the segment's cloud offering in just one year, indicating strong market traction across multiple segments including healthcare, finance, and defense.

Commitment to Sustainable Cloud Innovation

The company is recognized for its sustainable cloud solutions, underlined by its water cooling technology that celebrates its 20th anniversary, showcasing efficiency improvements over time. A carbon calculator innovation will soon enable customers to assess their exact carbon footprint when using OVHcloud services, encompassing all three scopes of emission calculations. This tool is set to become a key differentiator for the company.

Robust Q3 Financial Performance Fueled by Cloud Growth

Stephanie Besnier, an executive of the company, illustrated a robust Q3 with revenue growth of 13.2% like-for-like and 12.6% as reported. Public Cloud growth stood out at 20.1%, with Private Cloud also maintaining a healthy 14.5% like-for-like increase. A mix shift towards both Public and Private Cloud was seen as beneficial, with geographical performance particularly strong in Europe, showing acceleration, despite headwinds from regions like North America and Russia.

Maintaining Financial Discipline Amidst Rising Prices

With recent price increases contributing to 2-3% of revenue growth in the first nine months, the company maintained customer assurance and stickiness, evident from the revenue retention rate of 109% in Q3. The strategy involved progressive price increases while educating customers and upholding a strong financial discipline, especially in operational expenses and capital expenditures, all while investing selectively for future growth.

Guidance Points to Continued Growth and Fiscal Prudence

Michel Paulin, an executive of the company, provided guidance for the year with an expected like-for-like revenue growth between 13% to 14% and a margin expectation to be above 36%. Capital expenditures are estimated to be at the lower end of the range, factoring in Q4 revenue acceleration and the benefits of stringent cost controls. The company's growth strategy, customer-focused product innovations, and value propositions are underscored to be increasingly relevant in the contemporary market setting.

Earnings Call Transcript 2023-Q3

[Operator]

Hello, and welcome to the OVHcloud Third Quarter Fiscal Year 2023 Revenue Call. My name is George, and I'll be your coordinator for today's event. [Operator Instructions] Please note that this conference is being recorded. Today's speakers will be Mr. Paulin, CEO; and Ms. Stephanie Besnier, CFO. I'd now like to hand the call over to the OVH team to begin today's conference.

[Michel Paulin, executive]

Hello. Good morning, everyone. I am Michel Paulin, CEO of OVHcloud. Thank you for being with us today for OVHcloud's Q3 2023 revenue publication. Q3 has been a good quarter with a sustained revenue growth of 13.2% like-for-like. In absolute terms, our revenue reached EUR 228 million and grew by 12.6% as reported. In terms of key takeaways for our third quarter, I'd like to highlight the following. First, we are growing above 20% in the Public Cloud and in the mid-teens in Private Cloud. Second, we have a continuous acceleration in Europe after an already very strong H1. Third, growing demand for sovereign solutions quarter after quarter acts as a catalyst for OVHcloud. And as the European leader in data and IT, we continue to benefit from it. The next point is about the rollout of our product innovation, which is successful with PaaS solutions growing very well. We are also well positioned to capture business opportunities such as AI with high-performance new hardware, and I will come back later on what we do completely on AI. The company operates with a strong financial discipline across OpEx and CapEx, while remaining focused on supporting growth. Let me now reconfirm our guidance for fiscal year '23. So next slide shows that we are confirming all our targets for 2023. Our like-for-like revenue growth will be between 13% to 14%. Our adjusted EBITDA margin will be above 36%, and we expect our CapEx to be in the lower range of our guidance, recurring CapEx between $16 million to EUR 20 million and growth CapEx between 28% to 32%. As I said previously, we have a clear focus on financial discipline and agility while continuing to invest selectively for future growth. What I mean by financial discipline is controlling costs and improving our productivity and the return of investments. We are positioned in a fast-growing market and remain focused on delivering profitable growth. And today, we are making selective investments by improving and expanding our infrastructure with new data centers or new GPL for AI. Now I'd like to focus on our Q3 strategic highlights. The next slide show that we had in Q3 the continued double-digit growth in both Public and Private Cloud, with, respectively, plus 20% and 14.5% like-for-like. All in all, the Public business is growing mid-teens in the Q3. Overall, Public Cloud reached EUR 39 million of revenue in Q3. Private Cloud reached EUR 142 million of revenues and Webcloud reached EUR 47 million of revenues. Stephanie will come back with more details on the revenue performance in a few minutes, and I will, on my side, give you some insights on our customer dynamics on the next slide. Our strong growth performance is driven both by high customer loyalty and by successful customer acquisition strategy. On the left-hand side, we are very proud of the high customer loyalty evidenced by a strong revenue retention rate, which reached 109% in Q3 and by a double-digit APAC growth so far in 2023. On the right-hand side of the slide, the dynamic in terms of new customers and new contracts remained very strong as we had another good quarter of acquisition. Overall, so far in 2023, we have acquired more than 20,000 new customers in Public and Private Cloud with some exciting client wins highlighted by the logos. What is very interesting, sorry, is that the business dynamic with system integrators remain strong, and we continue quarter-after-quarter to sign new deals and to increase our share of wallet with existing customers, thanks to the strong partnership we have built.As I said at the beginning, we continue to innovate. Experience on the fast product side, which enables users to develop cloud-based applications. We are happy to report that we enjoy a strong growth on the products already rollout such as database, storage and containers. In Q3, we also launched new storage offering name called storage, and we have already customers in this product for industries such as media, legal or financial services. There are multiple use cases for this product, which show a very long-term and cost-efficient data storage. Also, over the last months, we have reinforced our AI offering to offer our customers a complete suite of tools to train, to clean, to start and to deploy our AI model based on very large private and public data assets. These developments around AI require works and infrastructure as well, which I will highlight on the next slide. The AI wave represents an incredible opportunity and require significant hardware capabilities to give customers the ability to run the most intensive AI compute. Today, we are the only large European cloud provider able to build the right infrastructure for generative AI. We already have powerful GPU designed for AI available in our cloud solutions, and we are currently working on rolling out the new A100 and H100 from NVIDIA, one of our partners. Our approach on AI is fundamentally different from other large players such as open AI or the hyperscalers. In addition to implementing new GPUs, we are integrating and improving open source private large language models. They will be white box model as opposed to the current black box models, which are kept secret and raised critical previously issues for the data. Our LLM will guarantee the intellectual property for our customers and the privacy of the data. Our customers will be able to use their own data sets to train their private model and be certain that the generative AI outputs won't be shared with any third party. This will be the evolution of the B2B generative AI, giving customers the full control over the privacy of the data and much more relevant output as customers will be able to have specialized models trained with their own internal datasets that are highly relevant for their own business. We have already customers using our GPUs for AI workloads, and we are working with some of them to improve our understanding of their need and serve them better. Quantum computing will be the next IT revolution. And it is already a reality. We have customers hoarding our counter as a service offering that enables them to simulate the constraints of the quantum and assess the potential opportunities of threat coming from this new paradigm. Current business opportunities on Quantum are 2 types. First, the large corporates or system integrators wanting to get ready and second, the startups that are developing applications running on Quantum. So our service will allow these customers to be ready and adapt quickly when Quantum's premise happens in the coming years. Large corporates must get ready to Quantum and we are the European cloud provider for quantum computing. We are positioned as a supporter of the European ecosystem, and we have a unique offering of different Quantum providers available already in our cloud. This is a key differentiator versus other players. We are not developing our own quantum technology. We are integrating partners, and we should have 5 to 6 services available in the coming months. It enables our customers to discover and use and train different content technology easily through OVHcloud offerings. We are executing our road map in terms of selective investment to expand our footprint globally as part of our strategic plan. We are currently opening new data centers globally, and we opened recently a new data center in India with a core ensure model, which is less capital intensive and enables us to implement and operate our own server, network and cooling infrastructure. We will open the Indian website in the coming weeks to target local customers and increase our total addressable market and the Indian market is one of the most dynamic markets in the world. We have a road map of new data centers with a focus of improved efficiency for this targeted investment, but we also remain agile and opportunistic on new locations depending on the business demand and the overall outlook. After this update on the key highlights for this quarter, I would like to zoom out and comment on our strategy to strengthen our European leadership in a growing cloud market. The slide shows that OVHcloud operates in a fast-growing market with an expected 5 years CAGR of more than 20%. The cloud market is driven by cloud adoption for all customer segments and it is mission-critical to their operations. Everyone is moving to the cloud. That has used energy booming, and we keep seeing new usage, new habits such as multi and hybrid-cloud selecting global cloud adaptation. More and more organizations deploy multiple cloud solutions to finally address the digital transformation needs. Even there is a short-term delay in some cloud migration projects or some optimization from customer, we are very confident in the long-term growth prospects of the cloud market. As the European cloud leader, we are ideally positioned to continue to capture opportunities in this fast-growing market. We are very happy that renowned industry analysts such as IDC recognized OVHcloud as the European cloud leader, and they underline our key competitive advantages. OVHcloud, offers a sustainable cloud, is a leading European cloud provider for data security. It is open and reversible. It adds predictable and transparent pricing and offer one of the best performance ratio. Our continued performance is fueled by innovation, as I said earlier. But another key element of success is our way of addressing our customers, how we work on our go-to-market strategy. As part of our strategic plan, we have implemented a clear strategy with dedicated channels and programs. First, on the top left of the slide, we have the enterprise channel, which is the fastest-growing channel. It includes a direct sales from our sales teams and the indirect sales realized through our partners. Indirect sales is a quite recent avid, and it's already very successful. As I said previously, we have been winning more and more deals with our partners, and it has been made possible thanks to our dedicated partner program. In Q3, we had more than 1,350 partners, of which more than 400 are advanced partners. This program enables our partners mostly IT integrators such as Accenture, Capgemini, Sopra to integrate OVHcloud in their own offering. It gives them the capability to offer to the customers their expertise, coupled with our unique cloud offering. Then on the top right of the slide, we have the digital channel, which is our historical go-to-market. It represents the sales that are done directly on the website and is driven by digital marketing and e-commerce strategy. We have a good growth in this channel, even if it suffers slightly more than the enterprise channel. Our digital customers are sensitive to the macro conditions and have been looking for a few months already to optimize their spending. The next slide show that OVHcloud is the European leader in data sovereignty. And the global legal and regulatory framework is increasingly favorable to HES. Europe is about to reach a major political agreement on the Data Act with European institutions, reinforcing freedom of choice for cloud users. The Data Act proposal for the new EU cybersecurity scheme incorporates in the IS level immunity to extraterritorial French scheme cloud. Also, recent news flows from around Microsoft, Meta, TikTok confirmed that data sovereignty is becoming a key concern for authorities and public opinion all over the world. Regarding our sovereignty solutions, we continue to see a strong traction with the combined growth. The revenue from our segment cloud offering has been multiplied by 10 in 12 months with a very strong growth every quarter. It confirms that data sovereignty is a strong driver for our business growth with a lot of different market segments being more and more concerned by this issue such as health care, insurance, finance, defense. And if we think about data and AI, it also raised a huge concern of data privacy and sovereignty around generative AI. And again, we are very well positioned by offering a generative AI that respect our values and our customers' intellectual property. OVHcloud 's leading position for sustainable cloud is recognized, and you see that in the next slide, by the analysts and by customers. And we keep innovating our offering. We are implementing a carbon calculator that will enable customers to assess our exact carbon footprint for any services that use OVHcloud . And this carbon footprint will include the 3 scope of calculation, which is a key in assessing your overall carbon footprint and knowing that all the large cloud provides only most of the time, the Scope 1 is our calculation. This will be a key differentiator and to bring even more value to our cloud offering as customers will be able to quantify how much greenhouse gas they use and save when they migrate to OVHcloud . Also, in May 2023, OVH cloud joined the European Code of Conduct for Data Centres to improve public recognition of our positioning. OVHcloud on the next slide, is a leading pioneer in sustainable cloud on several aspects. One of the most important is our unique at scale water cooling technology. It enables us to offer one of the best PUE and WA ratio in the world. This water cooling technology is by design more efficient than air conditioning. We celebrate the 20th anniversary of the invention of the water cooling technology a few months ago. And it is interesting to note how we keep improving our performance in that space. 10 years ago, we were able to dissipate 60-Watt of heat. Today, we are able to dissipate up to 500 Watt of heat with our water cooling technology. It is more efficient. It's cost effective. It's tenable even for the most advanced GPU used in AI and CPU. And now I let to turn to Stephanie.

[Stephanie Besnier, executive]

Thank you, Michel. Good morning, everyone. I am Stephanie Besnier and I am delighted to be with you today to present our Q3 2023 financial performance. As Michel said at the beginning, we registered in Q3 another strong revenue growth of plus 13.2% like-for-like and plus 12.6% as reported. This growth is fueled by a very strong performance in Public Cloud, which is growing at 20.1% and a solid growth in Private Cloud, which is growing at 14.5% like-for-like. We also benefit from a rebound in Webcloud in Q3 with a good performance of domain names. The continued strong dynamics of our cloud businesses is generating a favorable mix evolution as shown in the next slide. So on this slide, we can see that we are growing quarter after quarter. Our mix continues to evolve towards more Public Cloud, which is a nondynamic market and Private Cloud with the continued strong growth in these segments, thanks to the success of our go-to-market strategy and as the continued rollout of our innovation. Public Cloud now represents 17% of our revenues at 1 point versus last year, and Private Cloud represent 63% at 1 point. The strong performance of our cloud businesses is driven by, a, another quarter of customer acquisition; b, a continued ARPA growth and c, a steady ramp-up of our innovations, especially in past. The strong dynamism is also true when we look at the performance by geographies on the next slide. So when we look at our Q3 performance by geographies, we are very pleased with the growth in Europe with the continued traction in the region, especially in Germany and Eastern Europe. Europe has been accelerating since the beginning of the year and shows that our positioning as the Europe cloud leader is bearing fruit. In France, we also had another quarter of acceleration with a strong performance from the enterprise segment and the double-digit growth in Private and Public Clouds. In the rest of the world, we are facing a continued optimization from some customers, especially in North America. In addition, the comparison basis remains high in the U.S. overall. And finally, Russia kept weighing on the region in Q3. As you already know, we have increased our prices recently with the first set of price increase during the previous quarter. We've continued to benefit from the price increases in Q3. As shown on the right-hand side of the screen, we had a price contribution to our revenue growth of around 2% to 3% in the first 9 months, and we expect to have 2 to 3 point contribution on a full year basis. This strategy has progressive price increases with pedagogy with customers as is successful and has confirmed OBH pricing power. We have not seen any change in customer behavior. We have an unchanged assurance. And as Michel said, we had a strong customer acquisition dynamics in the cloud businesses. Also, we continue to have a high stickiness of our customers with a revenue retention rate of 109% in Q3. All these indicators give us confidence in our ability to mitigate any inflation impact today and in the future. We've implemented last quarter a strong financial discipline on the costs at all levels of the company while continuing to invest selectively for future growth. We execute these financial discipline in terms of OpEx, we've been limiting new hiring and implementing frugality at every level of the company. Regarding CapEx, we are improving our return on investment by tracking productivity gains. Before handing over to Michel, I'd like to repeat that while we increased our financial discipline, we remain very much focused on growth, and we keep investing in key areas such as AI for our future developments.

[Michel Paulin, executive]

Thank you very much, Stephanie. Now turning to our guidance for the year. We expect a like-for-like revenue growth between 13% to 14%. In terms of margin, we expect to be above 36% on a full year basis. Finally, regarding CapEx, we expect to be in the lower end of the guidance range. Our 2023 guidance takes into account several revenues and cost drivers, including an acceleration on our revenue growth in Q4 and the benefits of our focus on financial discipline in H2 at both the EBITDA margin and the CapEx level. We remain confident that the mid- and long-term growth trends of the cloud industry, and we see new series age such as AI ramping up. We think that our new product initiatives are differentiated services and our value for money propositions are even more relevant in this sort of environment. Finally, as a key takeaways, we had another quarter of sustaining growth in Q3. Our revenue reached EUR 228 million, with a like-for-like growth of 13.2% and 12.6% as reported. Revenue retention reached 109% confirming the stickiness of our customer base and our capacity to grow with them. We're executing our growth acceleration strategy quarter after quarter with all levers confirmed even reinforced in the current environment. And as I said previously, we are confirming our financial target for 2023 with a focus on growth and financial discipline. So thank you. And now we can open the conference to the Q&A session.

[Operator]

Thank you very much, Mr. Paulin. [Operator Instructions] Our first question today is coming from Toby Ogg calling from JPMorgan.

[Toby Ogg, analyst]

A couple for me. Just on the AI side. You mentioned you already have GPUs for AI workloads. Could you just talk about what the potential time line could be from here before we start seeing this becoming a more meaningful source of growth? And then just thinking about the CapEx component of that, how are you thinking about the CapEx requirements to build up your capacity of the latest GPUs or some of those more demanding AI and ML applications?

[Michel Paulin, executive]

Okay. So today, we have 2 types of different offerings that we proposed already in AI. As you said, we have GPU already available and they are available on our data centers, both in the Northern America, in Europe post today GPU. And we are rolling out A100 and H100 as I said, new capacity to provide the GPU. So this is something which is rolling out. And we see that there are a lot of interest, and we are confident that we will catch the capacity to interest with this computing capacity. Moreover, we have a second product that we have introduced, which is Network AI products that we introduced just recently. So it's a set of toolbox of tools in the box for help from startup, scale-up and also corporate companies to use more efficiently to be able to clean, train and select and store the data that they are in that data set to help them to use more efficiently their own models. And so we are confident that, again, we have today a comprehensive offering that will be interesting, and we are fully dedicated to capture this high potential growth and strong momentum that we see already in AI that we already have some good results because we have gained some references in some, I mean, customers either scale up or corporate. In terms of CapEx, it's a point, as we always have said, we will continue to invest to fuel growth and it will be exactly the same for the GPU. It's been we will have a very strong discipline to invest in this new GPU in a way which will allow us to create value long term. So we are continuing -- we have already invested in GPU in the last semesters. We will continue to do so with a new compute A100 and H100, but we will do that in a very disciplined manner to be able completely to have a good return on investment quickly. And that's why we have full confidence to maintain the content of the CapEx for the full year.

[Operator]

Our next question is coming from Mr. Mark Hyatt of Morgan Stanley.

[Mark Hyatt, analyst]

I've just got 2, please. So firstly, on competition. Over time, we've seen an increase in the number of providers offering European sovereign solutions, whether that be from the likes of T-Systems, Orange Capgemini, Ionis or more recently, Oracle with the launch of their sovereign cloud offering. Could you talk to us a little bit about how you see the market for these solutions developing over the next 12 to 24 months? And what differentiates OVH from the competition in a market that's becoming increasingly competitive? And then the second question is just on pricing. So far, you mentioned in FY '23, price increases have contributed to about 2% to 3% of revenue growth. What do you expect the price increase contribution to be next year in FY '24?

[Michel Paulin, executive]

About data sovereignty. The first one I want to mention is that, as you mentioned, we were the leader. We have the initiative to provide the type of solutions. And we see that the market now is responding with new offerings. So it demonstrates, I think, really that it proves that today, this is becoming a rising concern everywhere, and this is a strong opportunity. And we were the leader. We were the first. We will continue to be the leader in the first. If I want to see the competition dynamics of what we see. I will mention that we see 2 types of competition. The first one is in reality, not real data sovereignty solutions. A record said that they have a sovereignty solution, but it's not immune to the codec. So it's been that today, we are absolutely convinced that immunity for the codec, immunity for the extra too is becoming more and more important criteria. I just want to emphasize that, for example, in the new UNITA European certification, there is a fourth level which has been introduced by the European Commission, which is that immunity of -- against the extractor laws as is now a criteria of selection for a cloud provider. And clearly, when you are fully American or fully or depending on the majority on American technology, this is not the case. The second one is the answer that some European private provider, you mentioned you Ionis, but there are some other. I think today, the different competitive advantage that we have is that we have a much more comprehensive offering that today we provide to these players. We provide Public, Private Cloud, we complete a global footprint. We are able to provide that at the global level. And moreover, we have a very strong partnership program. We work already with Capgemini, Accenture, with Sopra Steria in these domains, all over Europe, and we are able to be the leader in the sovereign data. We are very proud to have a lot of ministries in Europe to have the European Commission as a customer, and we believe it will be really something which will continue, thanks to the fact that we are the first one, and we are areas of the competition. And for a technical reason or legal reason, I think we are very different. And from the opener, we are far ahead on that. Stephanie?

[Stephanie Besnier, executive]

Yes. So with regards to pricing, we started to increase our price in Q2 this year. And we did another set of price increase in April. Plus, we have some customers that are committing to the price increase we impaction renewals. This price increase, by the way, are doing well. I mean, our customers understood well the strategy, and we had no impact on our churn following these new increases. So we will see the full impact of this price increase in Q4 '23. And again, in '24, sorry, will have, again, the full impact of this price increase that was set in December and April.

[Operator]

Our next question will be coming from Mr. Ben Castillo from BNP Paribas.

[Ben Castillo-Bernaus, analyst]

A couple for me, please. Firstly, just on AI and on the software side for large language models. Obviously, training these models should be good for you, I suppose, with the high consumption required. I know we're early here, but are these large language models and training them, are they moving the needle yet for you? And if not yet, when might you expect to see that? And then I guess, if you look at your customer base, how much of your -- what percentage of your customers are really sophisticated enough to be using this kind of AI notebook offering? We could get a sense of this is something you think. Is sort of 10% of your customers or can be more than that? And then lastly, on the second on cloud, you mentioned in the press release, it was up 10x in the last year in terms of revenues. Could you just give us an indication of the scale of what that could be? And similar on the past contribution you time you broke that up for us in Q2. Perhaps you could give us a sense of the Platform-as-a-Service contribution in Q3.

[Michel Paulin, executive]

Okay. About the AI, our strategy on L&M, mentioned the AI, as I was mentioning, is 2 times. The first one, we want to have the capacity to provide high-level performance computing GPU-based capacity. And second, we want to give all the toolbox of any type of software, which allow customers to create their own AI approach in a way, which is a private debt asset, which is a way to protect their own data and to provide their IP and not to have that in the black box open and non, I would say, controlled model. We believe this will address most of our customers. And even so, as you said, you need to be a little bit of sophisticated to be able to represent these type of things. Our conviction is like quantum is that this motion, this towards AI will affect all the industries and all the factors. However, to be pragmatic and to deploy our strategy, we decided to focus on first, all the, I would say, AI companies, and we have many customers, either scale, start-up, but also companies like Sopra Steria, which are developing AI scripts and AI models, and we help them to have the -- all the element tools mainly based on the cloud source effort to provide lower solutions. So that's the first area of focus where we are devoting a lot of efforts to be able to propose a full set of elements to help them to develop their own AI solutions. The second is on our installed base, as you was mentioning, we are proposing a more packaged solutions like AI notebook to be able to use with less, I would say, making type of thing. And there, we believe that the market is very, very big. Of course, it needs a little bit of pedagogy. That's why we have also introduced some proton services to help the customers to be able to apprehend these new tools. We see that it is a huge opportunity. It will take a little bit of time to train them and to inform them, but this is very important. So we already have implemented some of these tools to more a bit more sophisticated on things, but we see that it's very, very promising market. About SecNumCloud, SecNumCloud is winning, I mean, offering today in France. We are recognized today, it's public information on the public offering of 6 implied as the #1 in France. And we believe that if it would be confirmed SecNumCloud becomes the European certification higher level, that we will be very well positioned to capture these strong momentum on data sovereignty across all the continent of Europe. And we will continue to develop new services. We announced, for example, that technical area will be soon available in OVHcloud and we will introduce all the path, not some paths because today, we have a restructured offerings. So we will enlarge substantially the SecNumCloud offering to all the plants that we have today in our product portfolio, including because there are some restrictions in SecNumCloud, including some very sophisticated AI. And again, we go back to AI or database or containerization or virtualization tools and data analytics type of tools, which have to be, of course, go through the certification process. So we are very confident today that long term, SecNumCloud is a very strong driver for growth, both in the public sector, but now more and more in the regulated sectors, such as financial health and the -- what is called in France Oval or the large public I mean, sector operating companies. So yes, we believe that SecNumCloud today is a very strong driver. We have demonstrated during the last quarter, and it will continue, thanks to the market drivers

[Operator]

Next question will be coming from Amit Harchandani from Citigroup.

[Amit Harchandani, analyst]

My question is actually going back to the growth trajectory of the business. You, of course, talked about generative AI today. But if I look at your target today versus maybe the midterm target, in the past, you have talked about the mix shift. You've talked about the move to pass. You've talked about international expansion and of course, market tailwinds that gets you to the mid-20s target. So given where we are today coming towards the end of FY '23, can you share your latest thoughts on how we should think about the trajectory towards the mid-20s target in 2 years' time? What are the building blocks? And any thoughts around revenue margins, trajectory and CapEx towards the medium-term target would be much appreciated.

[Michel Paulin, executive]

Okay. We are executing our growth strategy on the pillars that you mentioned and that as planned and as presented during the IPO based on strong pillars of growth that we believe are still very, very, I mean, important. And despite the environment, we believe that these pillars are still more than, I would say, up to date. Customer demand is strong in that usage. And clearly, AI will bring certainly new opportunities that was not envisioned. That's why we are in the process of fine-tuning our long-term strategic plan, including the global environment, fine-tuning our objective and beyond 2025. And of course, we'll update you with quantitative data about that very soon.

[Amit Harchandani, analyst]

Okay. And secondly, if I may, in terms of generative AI, you've talked about some of your offerings. In terms of positives and negatives, for example, in the past, you've talked about your sovereign offering. You've talked about your water cooling technological advantage. Would you say your ability to integrate open models is your key differentiator when it comes to generative AI? Or what else would you sort of call out as your key differentiator as it relates to generative AI?

[Michel Paulin, executive]

I think our differentiator are very similar to what we have in the past. First, clearly, price and cost performance. We are -- and we are recognized to have a GPU in most of the, I would say, a benchmark as the most competitive GPU today offering in against the [Indiscernible]. So price performance cost is clearly a positioning where we position ourselves, especially in the simple computing instances. The second clear differentiator that we have, including there in the software part, the AI, the machine learning AI solutions that we introduced and the next native LLM type of solutions that we are going to introduce is the fact that we are absolutely compliant with what is our promises to provide private or public type of data sets and white box type of modeling, which are 100% compliant with the data policy and also allow the customers to have a complete, I would say, control of their data set and all their IP inside this type of modeling. So this is really a way to guarantee the fact that we have a sort of open, sustainable model long term to give them the access to the AI. The last but not least is that and that has been made by one of our customers is that we have a green CPU, GPU. As you know, the GPU is a very high intensive energy consumption due to the fact that it consumed a lot of energy to dissipate. And thanks to our water cooling, we have today the most appropriate, I would say, sustainable GPU clusters, thanks to the innovation we introduced. So for us, we absolutely see that today, AI is a driver based on the current pillar of our differentiator, and it gives us a new opportunity to grow and to accelerate our growth with the same type and pillars of our strategy.

[Operator]

[Operator Instructions] Our next question is coming from Derric Marcon of Societe Generale.

[Derric Marcon, analyst]

I've got 4 to ask. The first one is on Q4. you reiterate the guidance for the year, but it leaves a large -- a wide range of possibility for Q4 between 13% organic growth. And at the top of the range, 17% of organic growth, if my math are correct. So can you give a little bit more color on what the growth rate might be in Q4? And should we extrapolate that for fiscal year 2024? That's my first question. The second question is about the Webcloud business. Was the performance in Q3, a good surprise for you? And what growth trajectory do you see for the coming quarter given the new offering that you will launch soon, if I have correctly understood your comments. Third, it's about price increase. shouldn't price increase in 2024 be higher than in Q4 2023 given the lag linked to the annual or middle year commitment contract that you have in your customer inserted base? I was surprised by the comment made from Stephanie. And the last question is about OpEx. How many additional staff do you need to put in the field to support the planned data center extension? So if my count is correct, it's 15 new data center that you plan to build in the coming years. So how many staff needed for that? And how long do you still think you will maintain the limitation on equipment? Because this apply to -- your comment applies for H2, but should we expect that also for fiscal year 2023?

[Stephanie Besnier, executive]

Yes. Thank you, Derric, for your questions. What I can tell you so far for the rest of the year is that June has been trading in line with our expectations. And we have a very -- a few very good drivers. We are benefiting again from the effect of the previous price increases. We see a good ramp-up of our past solution and a strong momentum also in our sovereign offering. Second, so we think also that overall, our Q4 will benefit from slightly easier comps compared to Q3. So all in, we are very confident in the full year guidance.

[Michel Paulin, executive]

To answer about Webcloud , as you know, Webcloud , we have a different set of products within the Webcloud . They are -- I mean, of course, digital-oriented type of solutions. The first one is the domain and the second one is Webcloud and for France, it's an Telecommute will not comment on telecom activity. The first one is about domain. What we see today is that the market first has grown. As you know that during the COVID, there was an acceleration on the domain. And after the COVID, the market slowed down a little bit -- and -- but what we see is that now there is a sort of rebound on the overall market. Moreover, we're sure that today, we are gaining market share in these moments. We have received, for example, that just recently, the Polish registry numbers, and we were in the winning players in Poland. So we see that there is a rebound. How it will be for a long time is always something where we should not speculate. That's why we are very focused on the execution and to maintain our execution model to continue to acquire new customers and to propose a really high quality of service. As you said, the Webcloud, which is sometimes related with domain because when a customer has for a domain versus the time he wants to have a hosting Webcloud or it's to the web. We get the benefit of the strong momentum that we have in domain. And therefore, that's why we are very pushy to introduce a new offering, which I'm convinced will help us to have a strong momentum in this domain. So for us, Webcloud remains, especially in domain and in the way, a good way to acquire new customers, long-term customers and to maintain a worldwide presence to continue. That's why we see that there is a strong commitment to execute, thanks to the new offering that we're introducing and the new evolutions of services that we are going to propose for the future.

[Stephanie Besnier, executive]

Yes. And the price increase direct to clarify, we passed the most impactful price increases in December and then again in April. So we have the full impact going forward from this price increase. What remains is also the impact of the customers that were committed before these price increases and then the -- we will see a price increase on those customers up on the renewal. But I mean much of the impact was again in December and in April so far. So we have a full impact starting in Q4 '23, we have a full impact again in '24 and maybe some additional effect from the end of the commitment of the renewal of the commitment.

[Michel Paulin, executive]

On your last question about staffing and the OpEx. As we were mentioning, our line of execution is a very strong discipline in terms of cost control and CapEx efficiency. However, we do that to be able to continue to maintain a good level of growth, and we do not want to jeopardize the future of the growth. That's the reason why we are investing to open new data centers to be able to create new opportunities and the Indian , I would say, for me, it's a very important example of what we want to achieve by expanding geographically with a very, very attractive and dynamic market, which is the Indian local market. Therefore, we will do, of course, staffing increase in line with the projection of the growth. And this is seen as investment with a good return on investment, but we would be, on the other hand, very disciplined to maintain the highest level of productivity on the current situation. And all the new initiatives will, of course, introduce maybe new test staffing. But for the current, we'll be very, very cautious and very disciplined for -- on hiring.

[Operator]

[Operator Instructions] Our next question today is coming from Valentin-Paul Jahan.

[Valentin-Paul Jahan, analyst]

I have one question about the workload optimization that we can see in the U.S. Maybe can you just update us on what you see and what you think will happen in the next quarter or few quarters?

[Michel Paulin, executive]

Yes. I think it's the workload optimization by the customers is something which has been commented by all the, I mean, analysts, and we see that clearly, this is a phenomenon that we see is clear. It's mainly in North America, but clearly, very important. But however, customer demand is strong, and we have seen, as I said, some customers taking a bit more time to invest and to optimize our cost by sometimes reducing or optimize their workloads. And I don't know how long it will take. It might last a bit or not. In any case, it's too soon to draw conclusions so far. And in the medium to long term, we are, however, very confident that the demand for cloud will be stronger and stronger than ever, especially with different trends that we mentioned about digitalization of the industry, the need for innovation, AI, quantum. So this for us are really very strong motions. And we believe that the workload will take, I don't know how long. But clearly, midterm, the perspective are very, very important in terms of cloud growth.

[Operator]

Ladies and gentlemen, as we have no further questions, I'd like to turn the call back over to the host for any additional or closing remarks. Thank you.

[Michel Paulin, executive]

Okay. Thank you for your questions. Before we close the call, it was a pleasure to speak with you. Our Q3 is another strong quarter with a sustainable revenue growth. All of our key differentiators, such as data sovereignty, price predictability, price performance, transparency, sustainability, open and reversible cloud and of course, best performance price ratio are more than valid in the current environment and with the amazing wave of AI and future for Quantix that opens a lot of opportunities. The cloud market is a fast-growing market, and we are very well positioned to continue to expand. So thank you very much, and have an excellent day.

[Operator]

Thank you very much. Ladies and gentlemen, that will conclude today's presentation. Thank you very much for your attendance. You may now disconnect.