Oracle (ORCL, Financial) reported better-than-expected fourth-quarter results on June 21, beating analyst expectations on the top and bottom lines and sending the stock surging by more than 8% after the numbers were announced.
Oracle reported earnings per share of 89 cents and quarterly revenues of $10.9 billion as the market was expecting only 78 cents per share on the back of $10.5 billion in revenues.
Oracle’s fourth-quarter revenues reached $10.892 billion, a growth of 3% compared to last year. The Software as a Service segment continued to be the star performer for the company, growing 67% during the quarter. It was only $34 million shy of the crucial one billion mark.
The surprise package during the fourth quarter was the performance of Oracle’s Infrastructure as a Service.
Oracle’s much-hyped Infrastructure as a Service group barely grew over the last several quarters as Amazon (AMZN, Financial), Microsoft (MSFT, Financial) and IBM (IBM, Financial) kept growing their cloud revenues in the 40% range despite crossing $13 billion in annual revenue run rate. But Oracle had only $525 million in revenues to show from the Infrastructure as a Service segment during the first three quarters, a mere 10% increase compared to the prior period.
But the growth rate has slowly been improving over the past several quarters and, during the fourth quarter, Oracle managed to increase its IaaS revenues by 40%, posting $397 million. Together, Oracle’s SaaS and IaaS segment revenues reached $1.361 billion, a growth of 58% compared to last year. The additional $502 million added by cloud was more than enough for Oracle to offset the declining Software Licensing and Hardware revenues, as Oracle eked out a 3% overall revenue growth for the quarter.
"Our fourth quarter results were very strong as revenue growth and earnings per share both substantially exceeded the high end of guidance," said Oracle co-CEO Safra Catz. "We continue to experience rapid adoption of the Oracle Cloud led by the 75% growth in our SaaS business in the fourth quarter. This cloud hypergrowth is expanding our operating margins, and we expect earnings per share growth to accelerate in fiscal 2018."
"We sold $855 million of new annually recurring cloud revenue (ARR) in the fourth quarter, putting us over our $2 billion ARR bookings goal for fiscal year 2017," said Oracle co-CEO Mark Hurd. "We also delivered over $1 billion in quarterly SaaS revenue for the first time. Next year is going to be even better. We expect to sell a lot more than $2 billion in new cloud ARR in fiscal year 2018." – Oracle Press Release
Despite being awfully slow to enter the cloud race, the recent quarterly reports suggest that Oracle has momentum going into next year. If Oracle can keep its cloud revenue streams growing at strong double-digit rates, it will be able to sustainably increase its revenues over the next several years. Oracle might need a few more years to get into a position from where it can really challenge the current leaders of the segment, but it looks like things are slowly shaping up for Oracle on the cloud front.
Disclosure: I have no positions in the stock mentioned above and no intention to initiate a position in the next 72 hours.
