Oracle’s latest cloud growth fails to convince

Can the database giant fill the gap in its declining legacy revenue with cloud?

Confidence in Oracle's ability to make up for a declining legacy business by boosting cloud revenues took a hit today, when the database giant released its latest financial results.

Cloud revenue year-on-year growth hit 29 per cent in Oracle's latest quarter, raking in $611 million, and kept pace with the last two quarters' growth of 28 per cent in the three months ending May and 30 per cent before that.

Advertisement - Article continues below

SaaS and PaaS services earned the company $451 million, up 34 per cent year-on-year, and IaaS grew 16 per cent to $160 million.

Viewed as a whole, cloud contributed seven per cent of Oracle's overall $2.7 billion revenue for the quarter, up from five per cent in the same period of 2014.

However, new on-premise software licenses, which represent 16 per cent of Oracle's total takings, dropped 16 per cent year-on-year to $1.15 billion, and total on-premise revenues worth 70 per cent of overall revenue - dropped four per cent to $5.8 billion.

It left Oracle to defend an overall revenue decline of two per cent to $8.4 billion, with shares falling 3.25 per cent at the time of writing.

Analyst house Creative Intellect Consulting questioned whether the tech giant could replace legacy declines quickly enough with cloud revenues.

Advertisement
Advertisement - Article continues below

Principal analyst Ian Murphy told IT Pro: "With physical licenses dropping and they're not replacing those with cloud licenses, there is a significant gap there."

Advertisement - Article continues below

While Oracle co-CEO Mark Hurd claimed new cloud bookings grew 150 per cent over the quarter, Murphy said this success was not reflected in the company's latest set of financials.

"That 150 per cent is a big positive," he said, but added: "[The cloud growth] is not what we would have expected to see from Oracle if they were successfully converting existing customers and winning new ones."

Oracle was nevertheless bullish on its cloud prospects, with co-CEO Safra Catz setting aggressive growth targets for its cloud margins, planning to double them over the next two years.

"Rapidly growing cloud revenue combined with a doubling of cloud margins will have a huge impact on EPS growth going forward," she said in a statement.

But doubling margins of small cloud revenue will not fill the gaps in falling legacy software earnings, analysts warned.

"All in all, Oracle is under intensifying attack on multiple fronts," wrote TechMarketView analyst Angela Eager, pointing to threats from rivals Salesforce, Workday and SAP, as well as the investment Oracle is making in transitioning to the cloud.

Advertisement - Article continues below

Murphy argued that the firm must make moving to its cloud a more attractive prospect to customers by adjusting its pricing, saying IBM has made its software licensing more flexible for customers of its private cloud mainframe, System Z.

Oracle CTO and founder, Larry Ellison, said the firm remains on course to book up to $2 billion new SaaS and PaaS business this fiscal year.

"That means Oracle would sell between 50 per cent more and double the amount of new cloud business than salesforce.com plans to sell in their current fiscal year," he added.

Featured Resources

Top 5 challenges of migrating applications to the cloud

Explore how VMware Cloud on AWS helps to address common cloud migration challenges

Download now

3 reasons why now is the time to rethink your network

Changing requirements call for new solutions

Download now

All-flash buyer’s guide

Tips for evaluating Solid-State Arrays

Download now

Enabling enterprise machine and deep learning with intelligent storage

The power of AI can only be realised through efficient and performant delivery of data

Download now
Advertisement
Advertisement

Most Popular

Visit/infrastructure/server-storage/355118/hpe-warns-of-critical-bug-that-destroys-ssds-after-40000-hours
Server & storage

HPE warns of 'critical' bug that destroys SSDs after 40,000 hours

26 Mar 2020
Visit/software/video-conferencing/355138/zoom-beaming-ios-user-data-to-facebook-for-targeted-ads
video conferencing

Zoom beams iOS user data to Facebook for targeted ads

27 Mar 2020
Visit/software/355113/companies-offering-free-software-to-fight-covid-19
Software

These are the companies offering free software during the coronavirus crisis

25 Mar 2020
Visit/mobile/mobile-phones/355088/apple-lifts-iphone-purchase-restrictions
Mobile Phones

Apple lifts iPhone purchase restrictions

23 Mar 2020