The Cloud

Oracle’s Cloud Sales Rise 62% But IaaS Lags

Total second-quarter revenue missed estimates as Oracle's “public cloud” infrastructure sales grew only 6%.
Matthew HellerDecember 16, 2016
Oracle’s Cloud Sales Rise 62% But IaaS Lags

Oracle’s second-quarter earnings narrowly topped analysts’ estimates but revenue came in below expectations as the company’s “public cloud” infrastructure offerings showed weak growth.

Oracle on Thursday reported non-GAAP earnings per share of $0.61, one cent above the Wall Street consensus. Revenue rose 0.5% to $9.04 billion, but analysts had expected revenue would hit $9.11 billion.

Total cloud revenue rose 62% to $1.1 billion, offsetting the continuing contraction in Oracle’s conventional software licensing business, where new software license sales brought in $1.3 billion in the quarter, down 20%.

Drive Business Strategy and Growth

Drive Business Strategy and Growth

Learn how NetSuite Financial Management allows you to quickly and easily model what-if scenarios and generate reports.

Oracle executives insisted the company’s transition from selling licenses for software that companies run on their own computers to selling subscriptions to web-based services is on track.

“The increase in revenue from our cloud business is starting to overtake our new software license business decline,” co-CEO Safra Catz said during a conference call with financial analysts. “Our cloud revenue will be larger than our new software license revenue next fiscal year when the transition will be largely complete.”

But in the “public cloud” market of providing on-demand computing power and data storage, known as infrastructure as a service (IaaS), Oracle generated just $175 million in sales in the quarter, a 6% gain.

Executive chairman Larry Ellison has predicted that Oracle will overtake Amazon as the leader in the IaaS market. In its most recent quarter, sales at Amazon’s cloud-computing unit, which are largely in the infrastructure market, grew 55% to $3.23 billion.

“We think it will be very difficult for Oracle to catch Amazon,” Stifel Nicolaus & Co. analyst Brad Reback told The Wall Street Journal.

In software as a service (SaaS) and platform as a service, Oracle’s combined sales jumped 81% year on year to $878 million. “This year we are selling more enterprise SaaS than any cloud services provider in the world,” co-CEO Mark Hurd said. “We expect to book over $2 billion in new annually recurring cloud business this year alone.”

Database as a service was up 700% year over year, hitting $100 million in quarterly revenue.