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Cloud Hogged the Limelight in Oracle’s Fiscal 3Q16 Results

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Oracle continued to post strong growth in cloud in 3Q16

Previously in the series, we discussed Oracle’s (ORCL) performance in fiscal 3Q16 and the impact of a strong dollar. The cloud was at the center of attention in Oracle’s results, standing strong next to the absence of growth in overall revenues.

In fiscal 3Q16, Oracle’s total cloud revenue grew 40% to $735 million. This growth was 44% on a constant currency basis. Oracle’s SaaS (Software as a Service) and PaaS (Platform as a Service) revenue grew 57% to $583 million in 3Q16. In constant currency terms, this growth was 61%. Oracle’s IaaS (Infrastructure as a Service) fell 2% to $152 million.

Commenting on Oracle’s performance in cloud, Bill Kreher, an analyst at Edward Jones, stated, “The world is shifting faster to the cloud, and Oracle is adapting appropriately.”

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Customer base continues to expand

In its 3Q16 earnings release, Oracle continued its habit of citing Workday (WDAY) and Salesforce.com (CRM). Oracle stated that it’s growing faster than Salesforce in the SaaS space and has ten times more customers than Workday.

Mark Hurd, one of the CEOs (chief executive officers) at Oracle, said in a conference call, “Our pipeline is huge in SaaS/PaaS. We’re on track for $1.5 billion of ARR bookings.” ARR refers to annualized recurring revenue.

In fiscal 2Q16, Oracle added 800 new PaaS customers and 612 new SaaS customers. In fiscal 3Q16, it added 1,143 new PaaS customers and 942 new SaaS customers. On a year-over-year and quarter-over-quarter basis, SaaS and PaaS billings grew 53% and 32%, respectively. Amazon (AMZN) leads the overall cloud space, while Salesforce.com dominates the PaaS and SaaS space.

You might consider investing in the SPDR S&P 500 ETF (SPY) to gain exposure to Oracle, which makes up 0.7% of SPY. Investors who would like application software exposure could also consider SPY. Application software makes up ~7% of SPY.

In the next part of the series, we’ll see why Oracle’s Software segment declined in fiscal 3Q16.

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