Oracle had a great quarter with continued growth that exceeded expectations and over achieved results in the Cloud. Strong Cloud revenue growth and improving margins on Cloud deals have nearly eclipsed declines in its new on-premise software licensing revenues. There is a Cloud land grab going on and Oracle has not only gone all in to win, but is now developing a track record of success. However, total revenue was flat YOY in constant currency with net income slightly increasing by 4%, leaving considerable opportunity for improvement.
Total Cloud revenue grew by 49%, with the largest growth coming from SaaS and PaaS at 66%, and IaaS at 5%. New on-premise software license revenue declined 12% YOY, while maintenance revenue grew 3%, leaving total on-premise software revenues with a 3% decline. Hardware revenues also declined 9% YOY. These results represent a shift in Oracle’s business model to the Cloud at the expense of its on-premise software and hardware businesses. This is a welcome shift for Oracle which can lead to greater growth, margins, and profitability in the longer-term.
Based on our takeaways below and the behavior we are seeing in the market, UpperEdge is forecasting high negotiation leverage for customers making a shift to Oracle’s Cloud offerings, as Oracle must continue to demonstrate sustained Cloud growth for the foreseeable future in support of its long-term strategy and improved profitability goals.