Nico Grant (Bloomberg) -- Oracle Corp. reported quarterly sales that topped Wall Street estimates on strong demand for applications, marking the world’s second-largest software maker’s return to growth amid a crucial transition to cloud-based computing. Shares gained about 3% in extended trading.
Revenue increased 1.1% to $11.1 billion in the period ended May 31 from a year earlier, the Redwood City, California-based company said Wednesday in a statement. Analysts, on average, projected $10.9 billion, according to data compiled by Bloomberg. Profit, excluding some expenses, was $1.16 a share, compared with estimates of $1.07 a share.
Chief Executive Officers Safra Catz and Mark Hurd have sought to maintain Oracle’s large customer base as the company competes with a dizzying number of rivals in the cloud-computing space. The software maker’s stumbles against Amazon.com Inc. and others have spurred the company to seek help from unlikely sources. Earlier this month, Oracle announced an alliance with longtime rival Microsoft Corp., letting customers use their respective clouds.
The period marked Oracle’s first year-over-year gain in total revenue since the fiscal first quarter.
Oracle shares jumped to a high of $56.87 in extended trading after closing at $52.68 in New York. The stock has gained 17% this year.
“Our cloud applications businesses are growing faster than our competitors,” Hurd said in a statement. “These strong results extend Oracle’s already commanding lead in worldwide cloud” accounting and human resources applications.
Cloud license and on-premise license sales increased 12% to $2.52 billion, suggesting that Oracle is doing a better job of signing on new customers. The company said that revenue from NetSuite grew 32%, and Fusion HR and financial suites gained by the same amount. Hurd has been keen to chase growth by selling corporate applications. He set a target for attaining 50% market share to best rival SAP SE.
Revenue from cloud services and license support was unchanged at $6.8 billion in the quarter, Oracle said. While that metric includes revenue from hosting customers’ data on the cloud, a large portion is generated by maintenance fees for traditional software housed on clients’ servers. The unit accounted for more than 60% of total revenue.
Sales of Oracle’s servers declined 11% in the period. Catz said the company has chosen to “downsize our low-margin legacy hardware business,” which Oracle acquired when it bought Sun Microsystems.
Oracle has been firing workers around the world to cut expenses. The company’s adjusted operating margin reached 47%, the highest in five years. The company’s costs related to restructuring also doubled to $168 million in the quarter compared with a year earlier.
The deal between Oracle and Microsoft will allow mutual customers to connect databases on Oracle’s cloud to applications on Microsoft’s Azure cloud. The agreement signified a concession by Oracle that it won’t be able to compete against Amazon Web Services alone. AWS offers cheaper versions of the databases that make up Oracle’s core business.