Oracle struggles to grow revenue in Q2

Oracle revenue in Q2 fiscal 2017Business software and networking major Oracle has struggled to grow its revenue in the second quarter of fiscal 2017.

The growth in Q2 revenue of Oracle was flat in U.S. dollars and up 1 percent in constant currency to $9 billion.

Despite a decent performance in Cloud business, Oracle’s total revenue was affected by worsening declines in license sales that were attributed to waning applications adoption rather than databases.

Oracle generated $878 million revenue (+83 percent) from Cloud software as a service (SaaS) and platform as a service (PaaS) business.

Total Cloud revenue, including infrastructure as a service (IaaS) of Oracle was $1.1 billion (+64 percent).

Oracle’s Cloud plus On-Premise Software Revenues were $7.2 billion (+3 percent).

Operating income of Oracle was $3 billion with an operating margin of 34 percent.

Oracle CEO Safra Catz said the company’s SaaS and PaaS growth rate is 89 percent. This growth rate acceleration has driven its quarterly cloud revenue to clock over $1 billion. When Salesforce crossed the billion dollar mark their SaaS and PaaS subscription growth rate had slowed down to 36 percent.

Oracle has now passed salesforce.com and become number one in SaaS cloud applications sales to customers with over 1,000 employees according to the latest IDC report.

Oracle CEO Mark Hurd said the company is selling more enterprise SaaS than any cloud services provider in the world.

“We expect to book over $2 billion in new annually recurring cloud business this year alone. And, with the acquisition of NetSuite, we plan on being the #1 cloud applications service provider for companies with less than 1,000 employees as well,” said Oracle CEO Mark Hurd.

IDC has ranked Oracle #1 in Enterprise SaaS, surpassing salesforce.com and overcoming their fifteen year head-start.

The NetSuite acquisition, a 2/3 majority of new customer wins in cloud and exceptional growth in Database-as-a-service that brought revenue from the product over $100 million, all drove Oracle’s total cloud revenue above a record $1 billion.

Oracle CTO Larry Ellison again alluded to the $10 billion SaaS and PaaS revenue mark that Oracle is striving to beat Salesforce to, but made his statement brief, affirming he expects to deliver on the promise but tapering expectations that “it will be close”.

While Salesforce as a whole is expected to eclipse $10 billion with the close of CY17, the subscription portion of that will fall short of the mark.

“This projection gives Oracle six quarts until the close of its own fiscal year in mid-2018 to increase its SaaS and PaaS revenues 3.4 times their 2016 total,” said Meaghan McGrath, analyst at TBR.

NetSuite subscription revenue additions ($708 in its last four quarters public) and PaaS acceleration will help Oracle at least eclipse $5 billion in CY17, but it will take additional cloud sales efforts and acquisitions to drive that figure beyond $10 billion before Salesforce.

Regardless of Oracle’s ability to beat Salesforce to $10 billion, the vendor is effectively executing on the more important goal of becoming a leading cloud vendor, evidenced by its ability to weather 2016 intact and the promise of cloud growth more than offsetting its legacy business declines in 2017.

Baburajan K
[email protected]

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