Oracle Earnings Soar on Cloud Growth
Brisk cloud growth drove strong results for Oracle's fourth quarter, reported Wednesday. The earnings were highlighted by software-as-a-service (SaaS) revenue, which topped $1 billion for the first time, up 75% year-over-year.
"The cloud has become our primary growth vehicle," Oracle Corp. Co-CEO Safra Catz said on an earnings call Wednesday afternoon. The company expects cloud to surpass new software licensing revenues in fiscal 2018, she said.
For the quarter, overall cloud revenue, which includes SaaS, platform-as-a-service (PaaS) and infrastructure-as-a-service (IaaS), was up 64%, to $1.4 billion -- still only a fraction of cloud plus on-premises software, which was up 6%, to $8.9 billion.
Overall revenues were up 4%, to $10.9 billion, with earnings per share of $0.89, compared with expectations of $0.79.
For the overall year, cloud revenues were $4.7 billion, up 66%; combined cloud and on-premises software was up 5% to $30.4 billion; and total revenue was up 2% to $37.9 billion, with earnings per share of $2.74.
Oracle Corp. (Nasdaq: ORCL) stock surged in after-hours trading Wednesday, to $51.24, up 10.6%.
Executives touted a big cloud win with AT&T. "AT&T has agreed to migrate thousands of existing Oracle databases containing petabytes of data plus their associated applications workloads to the Oracle Cloud," Oracle chairman and CTO Larry Ellison said in a press release on the company's earnings, released Wednesday afternoon. Oracle expects more big customers to follow AT&T Inc. (NYSE: T), "dramatically increasing the size of both our PaaS and IaaS cloud businesses," he said.
The AT&T deal, announced May 4, provided no revenue in the quarter, but will become an important reference customer and will demonstrate cloud momentum, Co-CEO Mark Hurd said. AT&T has more than 10,000 Oracle databases, including several hundred large databases with 70-75% of all company data. AT&T went to the cloud to achieve modernization and consolidation, and the company needed to meet regulatory needs on what could be put in the public cloud and what could not. AT&T is using Oracle Cloud Machine to put Oracle's cloud software on-premises in a private cloud.
Some 45% of cloud growth is coming from the company's existing customer base, with the rest coming from new business, Hurd said. "I believe we can get all our existing on-premises customers, roughly speaking, moving to our cloud infrastructure in time," he said. And when those customers move, they pay more -- triple the revenue to Oracle, and up. "If people move from our application support to our SaaS revenue, we get more money," he said.
In the outlook for the first quarter 2018, Oracle expects cloud revenue to grow 48% to 52%, and total revenue to grow 4% to 6%.
On the call, Ellison singled out Salesforce for trash talk. This was the second year in a row Oracle sold more cloud annual recurring revenue than Salesforce.com Inc. ; the company is on its way to passing Salesforce and becoming number one in the enterprise SaaS market, Ellison said.
Comparing the size of Oracle's cloud business with other cloud providers is unclear, as they report results differently.
Oracle's overall $1.4 billion quarterly cloud revenue is smaller than Amazon Web Services Inc. (AWS). AWS pulled in $3.66 billion in sales in the third quarter, ending March 31, up 43% year-over-year. That's concentrated on IaaS/PaaS, while Oracle is strong in SaaS. Nonetheless, Oracle considers AWS a direct competitor; Ellison singled them out for a mention on Wednesday's call and executives from the two companies trash-talk each other. (See AWS Sales Still Impress Even With Small Slowdown, Amazon's Jassy Throws Punches at Oracle and Oracle Takes On Amazon in Cloud Infrastructure.)
Amazon Web Services Inc. controls 33% of the public cloud market and is bigger than Microsoft, Google, IBM, Alibaba and Oracle -- combined, according to an April 27 report by Synergy Research. (See AWS Public Cloud Dominance Continues – Report.)
Google's "other revenues," which includes enterprise cloud and other non-advertising business, drew $3.1 billion revenue in the most recent quarter. (See Google's Pichai: Cloud's One of Our 'Biggest Bets'.)
Like Oracle, Microsoft has both a legacy on-premises software business and a new cloud business. Microsoft intelligent cloud segment, which includes Azure and traditional server software, was $6.8 billion, up 11% in the first quarter of the year. (See Microsoft Wants Azure to Blur the Enterprise Edge.)
Oracle results compare favorably with other legacy enterprise vendors, which are making the transition to cloud, but sometimes finding it a struggle. For example, Dell Technologies posted a $1.5 billion loss during its fiscal first quarter on $18.2 billion revenue, despite a strong Infrastructure Solutions Group, which includes cloud components. (See Dell Reaps Benefits of Cloud Infrastructure.)
Hewlett Packard Enterprise also posted a loss, as it continues to restructure and spin off different parts of its business while focusing more on hybrid IT, cloud and software defined data center. (See HPE Posts Loss as Company Restructuring Continues.)
Cisco, which is transforming from a networking gear company to a provider of cloud computing and other IT services, announced plans last month to lay off 1,100 and forecast a quarterly loss. (See Cisco Cutting 1,100 More Jobs, Forecasts Revenue Decline.)
— Mitch Wagner Editor, Enterprise Cloud News
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