Is the Cloud Responsible for the Fall in Oracle?



Fiscal 4Q18 revenue guidance

Earlier in the series, we discussed the factors that weighed on Oracle (ORCL) stock. Although Oracle posted double-digit growth in its cloud revenues, its revenue guidance—especially cloud for the current quarter—weighed on its stock. Oracle expects its revenue growth to be 1.0–3.0% for 4Q17, which translates to ~$11.1 billion–$11.3 billion. Analysts expected ~$11.2 billion.

Oracle expects its cloud revenues—including SaaS, PaaS, and IaaS—to grow in the range of 19.0%–23.0% in US dollars or 17.0%–21.0% in constant currency. Analysts expected Oracle to provide guidance of 23.0% growth in its cloud revenues.

With respect to Oracle’s fiscal 3Q18 results and growth in its cloud offerings, KeyBanc said, “While the Company is benefiting from a less-than-expected decline in on-premise license revenue, it appears the Company’s transition to the cloud is taking longer than we had initially expected.”

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Oracle and other small players are losing market share to big players

The chart above shows the top five players—Amazon (AMZN), Microsoft, IBM, Google (GOOG), and Alibaba—in the cloud space in 4Q17. Except for IBM (IBM), all these players boosted their market share, with Microsoft (MSFT) recording the greatest increase of 3.0%.

Alibaba (BABA) is the newest entrant in the top five companies on this list. IBM’s market share fell 0.5%. Alibaba was previously placed on the list of the next ten players, along with Oracle.

These next ten players, including Oracle and the rest of the market, lost market share in 4Q17. While the next ten players collectively lost 1.0% of market share, the rest of the market lost 4.0% of market share. This trend indicates that the top four players increased their market share at the expense of the smaller players, which lost share in the cloud space.


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