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How Cloud Revenues Could Affect Oracle’s Fiscal 1Q18 Results

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Sep. 13 2017, Updated 10:37 a.m. ET

Oracle’s growth and edge in cloud space

Earlier in the series, we discussed analysts’ expectations from Oracle’s (ORCL) fiscal 1Q18 results, which the company expects to release on September 14. The contribution of cloud revenues to Oracle’s overall top line has been growing steadily. In our view, this trend could continue in its fiscal 1Q18 results. This hope comes from the fact that a majority of Oracle’s license software customers have yet to convert to the cloud.

John Dinsdale, research director and chief analyst at Synergy Research Group, explained how enterprise software players like Microsoft (MSFT), SAP (SAP), IBM (IBM), and Oracle have considerable potential for growth and an edge over the new players in the cloud.

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Dinsdale said, “Traditional enterprise software vendors like Microsoft, SAP, Oracle and IBM still have a huge base of on-premise software customers and they are all now pushing to aggressively convert those customers to a SaaS-based consumption model. At the same time, born-in-the-cloud software vendors like Workday, Zendesk and ServiceNow continue to light a fire under the market and help to propel enterprise spending on SaaS.”
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Cloud contribution could rise to 25% of Oracle’s top line

In fiscal 4Q17, Oracle’s cloud business contributed 13% to the company’s top line, up from 8.0% in fiscal 4Q16. For fiscal 2017, cloud revenues comprised 12.2% of Oracle’s overall revenues, up sharply from ~7.8% in fiscal 2016 and 5.5% in fiscal 2015.

KeyBanc Capital Markets analysts forecast that cloud revenues could contribute 13% of Oracle’s revenues in the current fiscal year (fiscal 2018) and increase to 25% of its revenues in fiscal 2019. KeyBanc Capital Markets has an “overweight” rating on Oracle stock.

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