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How Oracle’s Cloud Offerings Performed in Fiscal 1Q17

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Oracle’s cloud revenues continued their growth trajectory

Earlier in this series, we discussed the fiscal 2Q17 performance of Oracle’s (ORCL) Software segment. In this article, let’s discuss the performance of its cloud offerings, which were expected to dominate Oracle’s fiscal 2Q17 earnings.

Oracle’s overall cloud revenues—comprising SaaS (software-as-a-service), PaaS (platform-as-a-service), and IaaS (infrastructure-as-a-service)—rose 62% to $1.05 billion in fiscal 2Q17. Fiscal 2Q17 marked the first time that Oracle’s cloud revenues crossed the $1 billion landmark. Oracle expects to book ~$2 billion in new, annually recurring cloud business in fiscal 2017.

The chart above shows cloud revenues increasing their contribution toward Oracle’s overall revenues. The contribution by the company’s cloud revenues more than doubled from 5.7% in fiscal 1Q15 to 11.7% in fiscal 2Q17.

Although Oracle is posting significant growth in cloud revenues, it still has a long way to go as these revenues still comprise only ~12% of Oracle’s overall revenues. None of the company’s other operating segments reported growth in fiscal 2Q17.

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Oracle’s strategic acquisitions

Oracle’s (ORCL) cloud infrastructure service revenues surpassed the $8 billion landmark in calendar 2Q16, with TTM (trailing 12-month) cloud revenue approaching $28 billion.

Amazon (AMZN) still rules the cloud space, with a market share of more than 30%. Amazon is followed by Microsoft (MSFT), IBM (IBM), and Google (GOOG), which collectively held slightly more than 20% of the cloud space. Considering the rapid growth, competitiveness, and dominance of the few players in the cloud space, Oracle apparently intends to not only expand its cloud portfolio but also scale up its cloud operations.

Oracle plans to achieve this scale by adopting the acquisitions route, a route that its peers—Microsoft, IBM, and Salesforce—have also chosen. In 2016, Oracle announced several strategic acquisitions namely Dyn, Netsuite, LogFire, Opower, Textura, Palerra, Ravello Systems, and AddThis. Oracle also partnered with Mellanox Technologies (MLNX) to enhance its presence and expertise in the cloud space.

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