Will Oracle See Top Line Growth In FY 2020?

by Trefis Team
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Yes, as per Trefis estimates Oracle (NYSE:ORCL) will see a growth of 1.1% in its top line for FY 2020 (ended May 2020). Oracle’s Cloud services and license support business is expected to contribute $27.1 billion to Oracle’s 2020 revenues, making up 67.9% of Oracle’s $39.9 billion in expected revenues for 2020. The Cloud services and license support business segment’s total revenue is expected to be nearly 4.5x of that from Cloud license and on-premise license business. Oracle is expected to add $2.2 billion in revenue between 2017 to 2020, out of which the Cloud services and license support business is expected to provide $3.3 billion, that is 150% of the total expected increase as all other segments are seeing a decrease in revenue compared to 2017. This Cloud services and license support business segment revenue growth has been key to Oracle’s 40% price appreciation since the start of FY 2017, further helped by improving margins. We discuss Oracle’s valuation analysis in full, separately.

Below we discuss Oracle’s business model, followed by sections that review past performance and FY 2020 and 2021 expectations for Oracle’s revenue drivers and competitive comparisons of its revenue with Microsoft and Apple.

You can look at our interactive dashboard analysis ~ Oracle Revenues: How Does Oracle Make Money? ~ for more details.

Oracle Business Model:

What does Oracle offer:

  • Oracle provides products and services that address enterprise information technology (IT) environments. The products and services include applications and infrastructure offerings that are delivered worldwide through a variety of flexible and interoperable IT deployment models. These models include on-premise deployments, cloud-based deployments, and hybrid deployments (an approach that combines both on-premise and cloud-based deployment).
  • The customers include businesses of many sizes, government agencies, educational institutions, and resellers that the company markets and sells to directly through their worldwide sales force and indirectly through the Oracle Partner Network.

Has 3 major Operating Segments:

  • Cloud and license business: This is comprised of a single operating segment and includes the Oracle Cloud Services offerings, cloud license and on-premise license offerings, and license support offerings.
  • Hardware business: This is comprised of a single operating segment and includes the hardware products and related hardware support services offerings.
  • Services business: This segment comprises of revenues earned through providing consulting and professional services to clients.

What Are The Alternatives?

  • Major competitors include SAP, Apple, Microsoft, IBM, and other companies.

What Is The Basis of Competition?

  • The key competitive factors in each of the segments in which Oracle currently competes, and may compete in the future, include: total cost of ownership, performance, scalability, reliability, security, functionality, efficiency, speed to production, and quality of technical support.

 

Revenue growth of about $2 billion over two years driven primarily by Cloud services and License support segment:

  • Total Revenue has grown from $37.7 billion in 2017 to $39.5 billion in 2019 primarily pushed by the Cloud services and license support segment. Trefis estimates further growth and Revenue to reach $39.9 billion and $41 billion in 2020 (ended May 2020) and 2021 (ended May 2021), respectively.
  • Cloud services and license support segment has seen a positive revenue growth over the years. Revenue grew from $23.8 billion in 2017 to $26.7 billion in 2019. Trefis estimates further growth and Revenue to reach $27.1 billion and $28.1 billion in 2020 (ended May 2020) and 2021 (ended May 2021), respectively.
  • Cloud license and on-premise license segment has seen a fall in revenue from $6.4 billion in 2017 to $5.9 billion in 2019. Trefis estimates revenue to grow and reach $6 billion and $6.2 billion in 2020 (ended May 2020) and 2021 (ended May 2021), respectively.
  • Consulting and Other services segment has seen a fall in revenue from $3.4 billion in 2017 to $3.2 billion in 2019. Trefis estimates revenue to grow and reach $3.3 billion in 2020 (ended May 2020) and 2021 (ended May 2021).
  • Hardware segment has seen a fall in revenue from $4.2 billion in 2017 to $3.7 billion in 2019. Trefis estimates revenue to continue the trend and reach $3.5 billion and $3.4 billion in 2020 (ended May 2020) and 2021 (ended May 2021), respectively.

 

 

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