Strong product suite and acquisitions driving cloud business
Oracle (ORCL) has continued to enhance its cloud platform through important acquisitions such as that of NetSuite, and by launching innovative product features. The company’s Fusion ERP[1.Enterprise Resource Planning] and HCM[2.Human Capital Management] products are hugely popular and remain key drivers of its overall cloud business. These applications not only widen margins for the company but also boost its renewal rate.
The company’s aim to combine innovative features such as voice recognition applications and autonomous database capabilities in the cloud may further drive business going forward. Also, the launch of its bring-your-own-license program may boost its cloud license revenue.
A financial analysis of Oracle’s cloud business
As shown in the graph above, Oracle’s cloud revenue has grown at a compound annual rate of 5.7% over the last five quarters. In fiscal 2018, the company’s cloud revenue rose YoY (year-over-year) to $6.3 billion from $4.6 billion, and its ERP and HCM revenue amounted to ~$2.2 billion. The ERP and HCM businesses grew 68% and 72% YoY, respectively, in fiscal 2018, boosted by the addition of new clients.
Oracle’s app ecosystem grew 11% YoY in fiscal 2018 to $11 billion, meeting its double-digit growth target, and its next-generation PaaS[3.platform-as-a-service] revenue grew 45% YoY to $1.1 billion. New deals with popular brands could act as a strong catalyst for the company. AT&T (T), which has always been a strong brand, is shifting its huge database to Oracle Cloud. According to Oracle, it has won many cloud contracts, outperforming Amazon (AMZN) Web Services on price and performance.