Oracle Showcases Cloud Revenue Growth In Q3 - InformationWeek

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3/16/2016
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Oracle Showcases Cloud Revenue Growth In Q3

Oracle highlighted its big cloud growth for both PaaS and SaaS offerings during the company's third quarter of its fiscal year. Oracle executives used the company's quarterly earnings release and call with analysts to position its cloud business against rivals Salesforce and Workday.

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Oracle put the emphasis on strong cloud revenue from its platform-as-a-service, up 61%, and software-as-a-service, up 57%, in constant currencies for the third quarter of fiscal 2016.

The company announced those strong results for its PaaS and SaaS offerings in its third quarter earnings announcement and subsequent conference call with analysts on Tuesday, March 15. Oracle has been pushing hard on the cloud message at least since Oracle OpenWorld in October, when co-CEO Mark Hurd offered a list of predictions for where the industry will be in terms of cloud computing in 2025.

The cloud push comes amid new competition that Oracle has faced from SaaS-only providers such as Salesforce.com, which offers online CRM software, and Workday, which offers online human resources software.


(Image: gong hangxu/iStockphoto)

(Image: gong hangxu/iStockphoto)

And those rivals were at top of mind for executives during March 15's earnings call with analysts.

For instance, during the call, Oracle chairman and CTO Larry Ellison was quick to point out Salesforce's shortcomings.

"Oracle competes in markets where Salesforce does not compete at all, such as ERP," he told analysts during the earnings conference call. "ERP has always been a much larger market than CRM. Salesforce is missing all that CRM opportunity."

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And in the company's prepared earnings statement, Ellison said, "we are growing much faster than Salesforce.com. We also have many more SaaS products than Salesforce.com. In some of our most important SaaS markets, such as ERP, HCM, supply chain, and manufacturing, Salesforce.com does not participate at all. By successfully competing in all of these markets, Oracle has the ability to sustain its high growth over a long period of time. That should make it easy for us to pass Salesforce.com and become the largest SaaS and PaaS cloud company in the world."

Workday, the online human resources SaaS company founded by former PeopleSoft founders, which has also introduced an online ERP offering, was also a target of competitive positioning during the earnings call.

Answering an analyst's question about competitive wins against Workday, Hurd ticked off a list of about 10 of them, including Southwestern Energy and Fannie Mae.

"We are seeing a lot of Workday defections," Hurd said. "It's slaughter."

Oracle executives said that cloud sales for both PaaS and SaaS would remain strong going forward based on the volume and quality of deals in the company's pipeline.

Third Quarter Numbers

For the fiscal third quarter, Oracle said that the strengthening US dollar compared to foreign currencies had a significant impact on revenue.

Total revenue hit $9 billion, down from $9.33 billion for the same period a year ago. As an example of the currency impact, revenue fell 3% in US dollars year-over-year, which is what is considered generally accepted accounting principles (GAAP), but grew by 1% in constant currency (non-GAAP). The company posted net income of $2.14 billion, down from $2.5 billion from the same period a year ago.

Oracle's breakout of revenue from its different technology groups demonstrated the changes happening in the industry, with on-premises software and hardware sales in decline -- but still a huge part of the business. While cloud revenue's rapid growth was impressive, the total still made up just a small part of the business.

Breaking out the performance of different businesses, total on-premises software revenue was $6.3 billion, down 4% year-over-year. Total hardware revenue was $1.1 billion, down 13% year-over-year. Total services revenue was $793 million, down 7% year-over-year.

Total cloud revenue was just a fraction of the business at $735 million, but was up 40% year-over-year. Breaking out those cloud numbers, infrastructure-as-a-service (IaaS) revenue was $152 million, down 2%. PaaS and SaaS were the areas that showed the momentum, up 61% and 57% respectively, in constant currency.

"Our cloud business is now in a hyper-growth phase," co-CEO Safra Catz said in a prepared statement.

Jessica Davis has spent a career covering the intersection of business and technology at titles including IDG's Infoworld, Ziff Davis Enterprise's eWeek and Channel Insider, and Penton Technology's MSPmentor. She's passionate about the practical use of business intelligence, ... View Full Bio

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