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Oracle full-year results show 6% growth, but cloud revenue opaque?

Oracle’s full-year results for 2017-18 reveal total revenue of $39.8bn, up 6%, but reporting of cloud with on-premise revenue under “bring your own licence” policy has raised qualm over cloud weakness obfuscation

Oracle has declared full-year revenue of $39.8bn for 2017-18, up 6% on the previous year, and fourth-quarter revenue of $11.3bn, up 3% year on year.

In a break from previous custom, the supplier reported its cloud and on-premise licence revenue together, and its cloud and on-premise services revenue together.

In the financial analyst call, co-CEO Safra Catz revealed cloud revenues for the fourth quarter – software as a service (SaaS), platform as a service (PaaS) and infrastructure as a service (IaaS) – to be $1.7bn, accounting for 15% of the $11.3bn total.

By comparison, Oracle’s third-quarter results for the 2018 fiscal year showed an 18% share for cloud.

For further rough comparison, cloud revenue for the previous full fiscal year (2016-17) was $4.6bn, 60% up on the year before, and representing 12% of the total.

In response to an analyst question about possible obfuscation of “cloud weakness” in the presentation of cloud and on-premise licence revenue together, Catz said: “There is no hiding... we are right where we said we’d be. No surprises. Margins up sequentially shows business is doing well. Cloud billings strong. Nice and strong. You can hear that.”

Oracle has instituted a “bring your own licence” (BYOL) policy, which allows customers to move their existing on-premise licences to the Oracle Cloud as long as they continue to pay support for those licences. 

Explaining the effect of the BYOL policy, as transcribed by the Seeking Alpha financial news site, Catz said: “Our new licence revenue is now a combination of new cloud licences and new on-premise licences. Our support revenue is now a combination of cloud licence support revenue and on-premise licence support revenue.

“To reflect these changes in our business, we have now labelled new software licences as cloud licence and on-premise licence, and we have combined cloud SaaS plus cloud PaaS and IaaS plus software licence updates and product support into cloud services and licence support.”

Oracle said in its earnings statement that fourth-quarter cloud licence and on-premise licence revenue was down 5% to $2.5bn, while services and support revenue in both categories was up 6.3% to $6.3bn.

Operating profit for the quarter was up 8% to $4.4bn, giving a margin of 39%. Net income was $3.4bn.

Full-year operating income was up 8% to $13.7bn, giving a margin of 34%. Net profit was $3.8bn.

Co-CEO Mark Hurd said: “We had a great fourth quarter with total revenues more than $200m above our constant currency forecast. Our strategic Fusion ERP and HCM SaaS cloud applications suite revenues grew over 50% in the fourth quarter, and we expect continued strong growth from our Fusion SaaS suites throughout FY19.”

Oracle chairman and CTO Larry Ellison said: “Some of our largest customers have now begun the process of moving their on-premise Oracle databases to the Oracle Cloud. For example, AT&T is moving thousands of databases and tens of thousands of terabytes of data into the Oracle Cloud. We think these large-scale migrations of Oracle database to the cloud will drive our PaaS and IaaS businesses throughout FY19.”

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