Oracle’s Profits Soar on Cloud Optimism

Oracle’s third quarter earnings soared past analysts’ expectations, as it reported a revenue of $9.3 billion. The consensus estimate was $9.25 billion.

Oracle’s revenue rose by three percent when compared to last year, and much of this can be attributed to Oracle’s transition into a cloud-based services provider. Three years ago, Oracle began making a big push towards the cloud market, and the efforts are visible in its revenue.

According to the company, Oracle’s revenue from its software-as-a-service and platform-as-a-service areas, that jumped 85 percent to $1.1 billion, while its total cloud revenue exceeded $1.2 billion. These numbers reflect a 62 percent increase in revenue from the cloud.

Its traditional software licensing business, on the other hand, fell by 16 percent. This goes to show that the company is focusing more on the transition towards its cloud segment than its other traditional areas of business. This is no surprise considering the power of cloud and the huge potential it offers for service providers. In fact, its CEO, Safra Catz opined that the hyper-growth that’s happening in the cloud market has driven his company’s SaaS and PaaS business, and he hopes to capitalize on this trend over the coming years.

Overall, this has been an impressive financial performance from Oracle. It reported an earnings per share of 69 cents, which is almost eight percent more than what it reported a year earlier. In fact, it beat the analysts expectations of 62 cents per share. The company also decided to hike its dividend to 19 cents, up from 15 cents of last year.

Such a positive result caused the company’s share price to soar five percent to $45.18 in after-hours trading. This would probably be the second highest price ever, with the highest being $46.70 set in December 2014.

With this revenue, the painful process of transition is over for Oracle, and it is all set to take on competition from giants like AWS, Microsoft and Google.

In an earnings call with analysts, Larry Ellison, the executive Chairman, said that Oracle has a huge technology lead when compared to AWS and Microsoft. He is believed to have bragged many times about the company’s services, saying that Oracle’s services are cheaper and better than AWS or Microsoft.

To give a perspective, Microsoft’s revenue increased by eight percent while that of Amazon rose by 47 percent during the same period. Given these numbers, we can conclude that Ellison’s comments are grandiose at best. Though Oracle has the potential to overtake Microsoft or AWS in the future, currently, AWS continues to be the undisputed leader in this market.

That said, the progress that Oracle has made over the last three years is remarkable, and at this pace of growth, it can take a big lead over its competitors. What is impressive is the company’s quick transition into the cloud market and the relatively little negative impact on its revenues over the course of this period.

In all, Oracle is making rapid strides, but still has a long way to go to catch up with its competitors.

About The Author
Lavanya Rathnam is a professional writer of tech and financial blogs. Creative thinker, out of the boxer, content builder and tenacious researcher who specializes in explaining complex ideas to different audiences.
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