Oracle executives on a conference call with analysts cited numerous examples of old and new customers rushing to take subscriptions to the company’s cloud computing software, as chairman Larry Ellison said the company is “well on its way” to surpassing Salesforce.com in sale as a cloud computing company.
Shares of Oracle (ORCL) traded up by $4.77, or 10.3%, at $51.10, in late trading, adding to initial after-hours gains, after the company comfortably beatfiscal Q4 revenue and profit expectations, and projected revenue growth this quarter, and earnings per share, comfortably higher as well.
Analysts were ga-ga during the conference call following the report, responding to the results with phrases such as “really phenomenal,” “impressive,” “very strong,” and “really fabulous.”
Founder and chairman Larry Ellison joined the call. He trumpeted the fact it was the second year in a row that the company had surpassed Salesforce.com (CRM) in annualized “recurring” cloud revenue. Said Ellison, “We are now well on our way to passing them and becoming number one in the enterprise SaaS market.”
Safra Catz, one of two chief executives at Oracle, told analysts that Oracle’s revenue from cloud has now reached a threshold whereby it behoves the company to report more detail in each quarter’s accounting summary.
For example, Oracle now reports “Software as a Service,” or SaaS, with its own line item, whereas in past the company had lumped that in with other cloud software known as “platform as a service.”
SaaS revenue rose by 75% in the quarter, on a non-GAAP basis, to $1.008 billion. (In GAAP terms, it was up 67% at $964 million.
Catz drew attention to the expansion of gross profit margin in SaaS software, which expanded to 65% from 54% in the year-earlier quarter. Catz said the company expects to get “pretty close” to her goal of 80% gross profit margin on SaaS by the Q4 of this fiscal year.
Mark Hurd, the other CEO, chimed in “With [cloud computing] revenue now at an annualized run rate of $6 billion and a growth rate of 66%, we’re clearly the fastest-growing cloud company at scale.”
Oracle’s told cloud computing revenue in the fiscal year ended last month was $4.57 billion 60% from the prior year. By way of reference, Salesforce is projected to have total revenue, including professional services, of $10.28 billion this year.
Revenue this fiscal year was boosted by the nearly $9 billion acquisition of Netsuite, which had trailing twelve-month revenue at last count of $846 million.
Revenue from the older stuff, so-called on-premise, was flat, and made up the bulk of revenue at $7.5 billion. Catz noted that new software licenses, which are now in the shadow of the “increasing preference of customers for cloud,” declined by 4%.
For the current quarter, the company sees revenue up 4% to 6%, including growth in revenue from cloud computing of 48% to 52%. The Street has been modeling revenue growth this quarter of just 3.8%.
Earnings per share is expected in a range of 59 cents to 61 cents, which is above consensus for 59 cents per share.
Next year, Catz said to expect earnings to rise by “double digits,” quite a bit better than consensus for just 8.6% growth. When pressed on the matter, Catz said that double-digit growth is “absolutely not a one-year phenomenon.”
The company expects to spend the same $1 billion this year in capital investments on cloud computing as it did last year.