Oracle’s Cloud Growth Reaches An All Time High But Legacy Business Continues To Offset The Growth
The leader in relational database software, Oracle (NYSE:ORCL) released its Q217 earnings on December 15th. Total revenues were essentially flat on a mix of positive and negative trends. For the fourth consecutive quarter, the company managed to delivered high growth with total cloud revenue of $1.1 billion up 64% in constant currency. The sub-segments were varied, however. Software- and Platform-as-a-Services revenues grew 83% to $878 million, while Infrastructure-as-a-Service revenues of $175 million were up a more modest 9%. Still, this is the first time Oracle has been able to show cloud revenues of over $1 billion in a quarter. On the other hand, Oracle’s on-premise new software license revenues, at $1.3 billion, decreased at an accelerating rate, down 19% as compared to 10% in the prior quarter. That said, the Software Updates and Product Support business—the company’s largest—generated revenues of $4.8 billion, up 3% in constant currency over the prior year. In sum, the On-premise business is down but not out. Revenues of $6.1 billion, comprising 68% of total revenues, was down just 3% on a constant currency basis.
Though Oracle’s cloud business is at an all time high, going forward it seems Oracle will have to focus on its overall growth as the investors remain skeptical about the company’s stagnant revenues since start of this decade, which was visible after the stock fell over 2% after Q2 earnings announcement in lieu of disappointing total revenues.
The three key takeaways from Oracle’s earnings event are:
- Oracle becomes the world leading Enterprise SaaS company, meaning it is ranked first in selling SaaS to companies with more than 1,000 employees
- With the acquisition of Netsuite, the company aims to be the largest seller of SaaS to companies with fewer than 1,000 employees.
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Oracle’s SaaS & PaaS Growth Remains On Track
- According to IDC, Oracle has become the the world’s leading Enterprise SaaS company which comprises of software sales to companies with over 1000 employees.
- Oracle has surpassed Salesforce (NYSE:CRM) in this domain and has been able to achieve 82% growth in SaaS & PaaS software, which the higher end of its guided range of 78- 82% growth.
- Also, Oracle is near to the goal of 84% growth which it needs over the next two years to reach the $ 10 billion SaaS & PaaS revenues. to compete Salesforce in this race.
- Other than this Oracle continues to spend on its data centers to expand its presence in the Infrastructure as a service. This was visible from the $ 1.05 billion on the Capital expenditure, which is a 65% increase over the same period last year.
Inclusion Of Safra Catz In Trump’s Transition Team Might Be A Positive For Oracle
Oracle’s CEO Safra Catz has been included in Trump’s transition team, which sends out the positive signal for the company. Oracle derives over 50% of the revenues from outside the United States and a lot of the company’s jobs are outsourced to the emerging nations. In such a situation, holding a key position in the transition team might give some hope to Oracle in lieu of earlier anti-outsourcing policy of the president elect.