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Investment Overview for Oracle (NASDAQ:ORCL)

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The Oracle management confidently disclosed that the growth in the company's cloud business had taken over the decline in its legacy businesses in percentage terms. Notably, Oracle also seems to have benefited from:

-Increased traction in its Autonomous database, as evidenced by the 5,000 trials in the Oracle Gen2 cloud during Q4.

-Growth in consumption within Gen2 appears to indicate potential sales growth higher than what Oracle could gather from its on-the-ground salesforce.

-Application revenues grew to 6% y-o-y in constant currency and infrastructure revenues grew 3% y-o-y in constant currency.

-Oracle has been hiring engineering groups to help growth of its Gen2 business.

We note that the departure of Thomas Kurian does not appear to have impacted Oracle's cloud growth, especially in a quarter where many cloud players have reported some level softness in revenue. If the company can continue executing along these lines, we believe that Larry Ellison's prediction of an inflection in 2019 looks quite possible.

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Oracle earns money through the sale of enterprise software and associated hardware. The company had launched its Gen 2 cloud and Autonomous database in order to increase the ‘as a service’ component in its offerings.

Cloud services and license support (2019 revenue of $26.7 billion, c.67.6% of total revenue)

Segment revenues are derived from the sale of subscription for Oracle Cloud Services and product upgrades.

Cloud license and on-premise license (2019 revenue of $5.9 billion, c.14.8% of total revenue)

Segment revenues are derived from the sale of software licenses to be used on-premise or in the cloud.

Hardware (2019 revenue of $3.7 billion, c.9.4% of total revenue)

Segment revenues are derived from the sale of hardware products and related software.

Services (2019 revenue of $3.2 billion, c.8.2% of total revenue)

Segment revenues are derived from the sale of consulting and technical support services.

How Does Trefis Modelling Work?

How do we get the historical numbers for this chart?

Trefis has a team of in-house Analysts who gather historical data from company filings and other verifiable sources. When historicals are available, we explain how we got them at the bottom of the Trefis analysis section below.

Who came up with the Trefis forecast for future years?

The Trefis team of in-house Analysts considers a variety of factors when projecting any forecast. The rationale for our projections is explained in the Trefis analysis section below.

How does my dragging the trendline on the chart impact the stock price?

1. We use forecasts for business drivers to calculate forecasted Revenues and Profits for each division of the company.
2. We then use forecasted Profits in a Discounted Cash Flow (DCF) model to obtain the Price Estimate for the company.

See more on: DCF Methodology

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