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Oracle Q1 2016-17: Oracle's cloud sales grow to almost $1bn

Oracle’s first-quarter fiscal 2017 revenue increased by 2% year-on-year, with cloud revenue for the quarter reaching $969m

On the eve of its annual Oracle OpenWorld conference in San Francisco, the supplier has announced first-quarter 2016-17 revenues of $8.6bn, up by 2% on the same quarter in 2016, but $100m short of its declared target. The company cited the effects of the Brexit decision as a factor in the reduction in anticipated revenues and profit.

Oracle’s cloud revenue for the quarter was $969m, 11% of the total – up from 7% of total revenue for the same quarter in 2016 ($611m), and so an increase of 58%.

The supplier registered $2.6bn in operating profit, a margin of 31%. Net profit was $1.8bn, up by 3% on 2016’s Q1 figure of $1.75bn.

“Next week at Oracle OpenWorld, we will introduce the second generation of our infrastructure as a service [IaaS],” said Oracle chairman and CTO Larry Ellison in an earnings statement.

“Our Generation2 IaaS delivers twice the compute, twice the memory, four times the storage and 10 times more I/O [input/output] at a 20% lower price than Amazon Web Services. IaaS represents a huge new cloud opportunity for Oracle to layer on top of our rapidly growing SaaS [software-as-a-service] and PaaS [platform-as-a-service] businesses”.

Oracle co-CEO Safra Catz said in the same statement: “As our SaaS and PaaS business continues its rapid growth, we expect its gross margins to climb from 62% this quarter toward our 80% target.”

In an analyst earnings call transcript, provided by the Seeking Alpha news and results service, she added: “Our total cloud revenue in the quarter was nearly $1bn, up by 63% in constant currency from last year.”

But Catz also acknowledged that “the surprise Brexit vote” had caused currency movements that reduced expected profits by 1%.

“This year we are on track to sell more than $2bn of SaaS and PaaS annually recurring revenue,” commented Catz’ fellow CEO Mark Hurd.

“We believe this will be the second year in a row that Oracle has sold more SaaS and PaaS than any cloud services provider. In the first quarter alone, we added more than 750 new SaaS customers, including 344 new SaaS Fusion ERP [enterprise resource planning] customers – that’s more ERP customers than Workday has sold in the history of their company.”

On the analyst call, Hurd added that Oracle will announce the latest-version database at Oracle OpenWorld on Sunday 18 September 2016. “It’s going to be available in the cloud, on Exadata [the supplier’s in-memory database appliance],” he said.

Also on the call, Ellison said it was still early days for Oracle’s cloud business.

“We’re now beginning to move our installed base into the cloud. And this is a lot of expansion. It’s not like they’re going to stop running on-premise,” he said.

“We believe this is sort of the next decade. This is a coexistence story. They are going to continue running some of their stuff on-premise and they’re going to move some of their stuff into the cloud and those two things have to coexist”.

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