Database giant Oracle (NYSE:ORCL) reported its fiscal third-quarter results after the market closed on Monday. It was clear on Tuesday morning that investors weren’t happy. Oracle stock was down about 10% at midday, despite a big earnings beat and in-line revenue.
Oracle’s cloud business put up some solid growth numbers, but the company’s guidance for the fourth quarter left a lot to be desired. Here’s the good and the bad from Oracle’s third-quarter report.
Strong cloud growth
Oracle has talked a big game when it comes to cloud computing over the past couple of years, taunting market leader Amazon. The company announced its second-generation cloud infrastructure in late 2016, with Executive Chairman and CTO Larry Ellison proclaiming: “Amazon’s lead is over. Amazon’s going to have serious competition going forward.”
About a year later, Oracle unveiled its autonomous database cloud, which uses machine learning to lower costs. This time around, Ellison said that Oracle would guarantee in writing that its new database service would cost less than half the price of running the same workloads on Amazon Redshift on AWS.
While Oracle is still far behind the e-commerce titan in the cloud computing market, its cloud business grew quickly in the third quarter. Third-quarter cloud revenue jumped 32% year over year to $1.57 billion. Software-as-a-service (SaaS) generated $1.15 billion of revenue, up 33% year over year, while infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) generated $415 million of revenue, up 28% year over year. This helped Oracle grow total revenue by 6%, despite a slump in new software license, hardware, and services revenue.
The SaaS business is approaching a $5 billion annual run rate, and the company believes there’s plenty of growth ahead. CEO Mark Hurd elaborated:
Less than 15% of our on-premise applications customers have begun to migrate their applications to the cloud. As the other 85% of our applications customers start to move their applications to the Cloud, we have a huge opportunity in front of us. We expect to more than double the size of our SaaS business very quickly.
The autonomous database is now fully available on Oracle’s Cloud, and the company plans to launch other autonomous services this year, including Autonomous Analytics, Autonomous Mobility, Autonomous Application Development, and Autonomous Integration.
Cloud computing growth, along with some share buybacks, helped Oracle grow its non-GAAPearnings per share by 20% year over year. GAAP operating costs rose by just 2%, handily outpaced by revenue growth. Oracle’s non-GAAP EPS of $0.83 beat the average analyst estimate by $0.11.
Article Credit: The Motley Fool
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