Oracle Beats Estimates in Sign of Traction for Cloud Push

Over the past few months, the company has engaged in a charm offensive meant to woo new and old customers to convert to its cloud products.


June 20, 2018

3 Min Read
Safra Catz Photographer: David Paul Morris/Bloomberg

Nico Grant and Emily McCormick (Bloomberg) -- Oracle Corp., the world’s second-largest software company, reported sales that topped Wall Street’s expectations, signaling its struggling pivot to the cloud may have gained some traction.

Profit excluding some items rose 11 percent to 99 cents per share on sales of $11.25 billion in the fourth fiscal quarter, the Redwood City, California-based company said in a statement Tuesday. Analysts had on average estimated 94 cents a share and revenue of $11.2 billion, according to data compiled by Bloomberg News.

Oracle’s Chief Executive Officers Safra Catz and Mark Hurd have expanded the company’s cloud offerings in a bid to shore up sales. Over the past few months, the company has engaged in a charm offensive meant to woo new and old customers to convert to its products accessible via the internet and by subscription, instead of programs that clients hosted on their own servers.

The steps have included beefing up service quality in its maintenance program and selling customers a so-called “automated’’ version of its flagship database program, arguing it will reduce clients’ labor costs. The company also bolstered its sales team. But as Oracle follows Inc., Microsoft Corp. and Inc. in offering web services hosted remotely, there’s persistent concern that the company’s progress hasn’t moved fast enough.

Related:Why Oracle Thinks It Can Beat Amazon at Cloud

Cloud is a major initiative being undertaken by corporate chief information officers, said J. Derrick Wood, an analyst at Cowen & Co.

“It’s a top priority and it’s where more budget is being spent. If you’re not partaking in that cloud initiative, you’re not partaking in where the growth in budget dollars are going," Wood said, speaking in a phone interview before the earnings were released. “The quicker Oracle can get their customers to the cloud, the quicker they can start driving more growth and more wallet capture out of those customers."

Last year, Catz forecast double-digit adjusted earnings per share growth for fiscal 2018 and the company delivered an increase of 14 percent, she said in the statement, “largely driven by strong growth in our cloud businesses.” For fiscal 2019, Catz said she expects revenue increases should help the company again deliver double-digit adjusted earnings per share growth.

The shares oscillated in extended trading, initially shooting up as much as 4.6 percent before giving up most of those gains. In March, they fell the most in six years after the company forecast slowing sales in cloud-related products.

Oracle changed the way it reports cloud revenue with these results and didn’t disclose new software license revenue in the quarter. The company said cloud services and license support revenue, which accounts for 60 percent of the total, was up 8 percent to $6.8 billion. Cloud license and on-premise license revenues were down 5 percent to $2.5 billion.

Some of Oracle’s largest customers have now begun the process of moving their on-site databases to the cloud, said Chairman and Chief Technology Officer, Larry Ellison. "For example, AT&T is moving thousands of databases and tens of thousands of terabytes of data into the Oracle Cloud,” he said.

Oracle has likened its new database to a self-driving car, because it forgoes human administrators and has the ability to patch itself. The company has hoped lower labor costs might entice new and existing customers to adopt the technology.

The company also invested in a new center in Austin, Texas, which will eventually house 10,000 employees -- including many in sales. Oracle has recruited a new generation of sales staff from a litany of universities across the U.S.

Oracle became one of Silicon Valley’s most cash-rich technology companies because of its relational database – a technology that allows organizations to store and process data, such as retail transactions. Ellison said in March that rivals including Salesforce, SAP SE, Microsoft and Amazon are all Oracle customers, though some have reportedly taken steps to transition away from the company’s products.

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