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Oracle Cloud Sputters, as CEO High-Fives Herself Over Earnings

Mitch Wagner
9/17/2018
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For Oracle, the cloud is dark and scary. With the overall market growing at 50% year-over-year and competitors clocking in double-digit growth, Oracle reported cloud services and licenses revenue of $6.6 billion, up 3%. Overall revenue was $9.1 billion, up a sad 1%.

And the cloud isn't a sideline for Oracle Corp. (Nasdaq: ORCL); it accounts for 72% of revenues, according to results for the first quarter 2019, ending August 31, and reported Monday.

Non-GAAP net income was up 10% to $2.8 billion, while non-GAAP earnings per share was up 18% to $0.71.


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With revenues disappointing, it made sense for Oracle CEO Safra Catz to congratulate the company on earnings. "We are off to an excellent start with Q1 non-GAAP earnings per share growing 19% in constant currency," she said in a statement. “That strong earnings per share growth rate increases my confidence that we will deliver on another fiscal year of double-digit non-GAAP earnings per share growth."

And Oracle is growing market share in cloud-based Enterprise Resource Planning (ERP) applications, with the vast majority running either Oracle Fusion or Oracle NetSuite, Oracle says.

Wall Street is unhappy. Shares fell nearly 5%, to $46.90 in after-hours trading Monday. Earnings of 71 cents per share beat 69 cents as expected by Thomson Reuters, but revenue of $9.19 billion lagged $9.28 billion expectations. Oracle has come in below revenue estimates for two of the four most recent quarters, CNBC reported.

By comparison, Microsoft Corp. (Nasdaq: MSFT) annual revenue topped $110 billion for the first time in the company's history in the fourth quarter results reported in July. Commercial cloud revenue grew 53% year-over-year for the quarter to $6.9 billion, and Microsoft Azure revenue growth was 89% -- the first time it dipped below 90% in a while. (See Microsoft Soars on Cloud Sales, Reports Record-Breaking $110B in Annual Revenue.)

Amazon Web Services Inc. net sales were $6.1 billion in the quarter ending June 30, up 49% year-over-year.

Overall, cloud infrastructure services grew 50% year-over-year in the second quarter of 2018, according to Synergy Research Group Inc. Amazon is bigger than its next four competitors combined -- Microsoft, Google, Alibaba, and IBM. Synergy calls Oracle a niche player, albeit a strong one. (See Amazon Still Dominates Cloud Market, Bigger Than Next Four Competitors Combined.)

Oracle's got a lot of catching up to do, and this quarter's results aren't helping. It would be exaggerating to call the earnings a car fire, but they're not good. (See We're Sorry If We Set Your Car On Fire – Love, Oracle.)

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