Oracle’s cloud offerings’ contribution increases but fails to meet analyst expectations
Earlier in the series, we discussed Oracle’s (ORCL) operating segments’ performances. Now let’s look into its cloud offerings performance in fiscal 2Q18. In the last quarter, Oracle’s total cloud revenues rose 44% to $1.5 billion. Oracle’s SaaS (software-as-a-service) offerings grew 55% to $1.1 billion, contributing close to 74% to cloud revenues. Oracle’s PaaS and IaaS grew 21% to $396 million. Oracle’s cloud revenues’ contribution grew to 16% of its total revenues compared to 12% in fiscal 2Q17.
Fusion ERP (enterprise resource planning) and Fusion HCM (human capital management) emerged as the highest performing applications with their revenues reporting growth of 65% in the quarter. In the coming four quarters, Oracle expects to earn ~$2 billion in enterprise SaaS revenue. Larry Ellison said, “We expect to extend our lead by selling around US$2 billion in new enterprise SaaS application cloud subscriptions over the coming four quarters. That’s more new SaaS sales than any of our competitors.”
Notably, Microsoft (MSFT) continues to be a leader in the enterprise SaaS space, while Adobe (ADBE), Oracle, and SAP (SAP) are among the top five players. However, in calendar 2Q17, Oracle, along with Microsoft and Google, reported the highest growth rates in the SaaS space, as reported by Synergy Research.
Fiscal 3Q18 expectations
Despite several claims made by the company regarding its success and transition to cloud, Oracle’s cloud growth guidance fell below analysts’ expectations. Oracle expects its cloud revenues to grow 21% to 25%, while analysts expected 42% growth in the current quarter.