Oracle: It’s All About The Cloud

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Oracle (ORCL) reports quarterly earnings after-hours. Analysts expect revenue of $9.78 billion and eps of $0.72. The revenue estimate implies about 2% growth sequentially. Investors should focus on the following key items.

It’s All About The Cloud

Oracle provides provides and services that address various aspects of a company’s information technology environment – application, platform, and infrastructure. Its cloud offerings provide a fully integrated suite of applications, platform, compute, storage and networking services via the cloud, including Software as a Service (“SaaS”), Platform as as a service (“PaaS”) and Infrastructure as a Service (“IaaS”). The company’s on-premise IT offers application and database services, and hardware products including servers and storage.

Cloud services and on-premise services make up over 80% of Oracle’s total revenue. However, most of its top line growth is derived from the cloud. Last quarter the company generated $9.6 billion in revenue, which was up 6% Y/Y. On Premise Software was up 3%, while Cloud SaaS and PaaS were up 55% and 21%, respectively. Oracle allows clients to interact with their own customers via mobile devices through the cloud. It derives subscription service fees from customers accessing its cloud services. If more work performed remotely then Oracle’s emphasis on the cloud makes sense.

This is an important quarter for the company’s cloud services. Oracle closed its $9 billion acquisition of cloud services company Netsuite around this time last year. This quarter the year-over-year revenue and earnings comparisons should be apples-to-apples since both periods will include the benefit of Netsuite’s operations. That said, revenue growth for Cloud SaaS should be much lower than the 54% reported last quarter.

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