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Evaluating Oracle’s Key Business Drivers

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Cloud growing in strength

The cloud computing platform, including IaaS, PaaS, and SaaS, is the major driver of Oracle’s (ORCL) business. Despite being a late entrant to the cloud business, the company has picked up the pace by signing new clients for its cloud platform.

Oracle’s goal to acquire new software companies may allow the leading database management provider to boost its SaaS service as well as reduce time to create new software for its cloud platform.

Oracle’s Fusion ERP (Enterprise Resource Planning) and HCM (Human Capital Management) in the SaaS cloud suite has been gaining traction in various industries. These applications drive higher margins for the company and accelerate its subscription renewal rate.

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Other growth drivers

The graph above shows Oracle’s total revenue growth in the last five quarters. During this period, it grew at a CAGR (compound annual growth rate) of 2.0%. In fiscal 3Q18, its total revenues reached ~$9.8 billion, a 6.0% YoY (year-over-year) increase. At the end of fiscal 9M18, the company’s overall revenues stood at $28.6 billion versus $26.8 billion in fiscal 9M17.

Oracle’s Licensing business is also showing stable growth momentum driven by its BYOL (Bring Your Own Device) option, which allows its clients buy an Oracle license and then deploy that license to the cloud. These licenses are also available in the SAP, Microsoft (MSFT), and Amazon (AMZN) clouds.

The company’s acquisitions are also creating value for the company. The acquisition of Sun Microsystems and NetSuite are paying solid dividends to the company in terms of new apps and hardware. A fully autonomous self-driving database, which is available in the Oracle cloud, can become another key catalyst for growth.

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