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Oracle’s Services Segment Performance in Fiscal 1Q16


Dec. 4 2020, Updated 10:52 a.m. ET

Oracle’s Services segment reported minimal growth in fiscal 1Q16

Previously in the series, we discussed Oracle’s (ORCL) earnings performance in fiscal 1Q16. Let’s see how Oracle’s Services segment performed in 1Q16.

In fiscal 1Q16, Oracle’s Services segment reported revenues of $862 million. It reported a growth of 1% on a year-over-year basis. However, in constant currency terms, the Services segment reported a growth of 10%.

Oracle’s Services segment is composed of consulting, customer support, and education services for its products and services. These help customers to use Oracle’s hardware and software so that they get most out of their products, regardless of their technical expertise.

IBM’s (IBM) Global Services division operates in a similar manner. The majority of enterprise software companies, including HP (HPQ) and SAP (SAP), have targeted services revenues in general, and consulting in particular, to boost their revenue growth.

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Services segment contribution to overall revenue is flat

In fiscal 2015, the Services segment contributed 9% towards Oracle’s overall revenue. In fiscal 1Q16, it contributed 10% towards the company’s overall revenue.

Oracles’ service revenues are dependent on the company’s installed product base. They are thus exposed to extreme volatility by a multitude of factors like acquisitions, general economic conditions, government budgetary constraints, reductions in customer IT (information technology) departments, and controls over discretionary spending.

Moreover, as the Services segment is a low-margin business in comparison to other operating segments, Oracle is not keen on allocating resources and expenditures to boost its growth.

You can consider investing in the PowerShares QQQ Trust ETF (QQQ) to gain exposure to Oracle. QQQ invests about 3.08% of its holdings in Oracle.


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