Oracle posted better-than-expected revenue and earnings-per-share growth for its fiscal 2018 fourth quarter, as executives highlighted particularly strong momentum in the company’s database, cloud ERP, and cloud HR application businesses.
For the quarter ended May 31, Oracle reported revenue of $11.3 billion, up 3% from the year-earlier quarter. Operating income was $4.4 billion, up 8% from a year earlier, while diluted earnings per share was 82 cents, also up 8%.
Oracle’s cloud services and license support revenue increased 8% in the quarter, to $6.8 billion. That number represents more than half (60%) of total company revenue as Oracle transitions from selling on-premises software and hardware to cloud services.
For the full fiscal year, Oracle’s operating income rose 8% from the year earlier, to $13.7 billion, on 6% higher total revenue of $39.8 billion.
Big ERP, HCM Wins
CEO Mark Hurd emphasized big fourth-quarter customer wins for the company’s cloud-based ERP (financial, procurement, manufacturing) and HR (recruiting, onboarding, payroll, talent management) application suites. Among the Oracle ERP Cloud wins Hurd cited—many of them against SAP—were Baylor University, Con Edison, Cox Communications, Facebook, Intel, Johnson & Johnson, Mount Sinai Health System, and United Parcel Service.
Among the fourth-quarter customer wins for Oracle HCM (Human Capital Management) Cloud—all against cloud rival Workday and some of them dual ERP-HCM wins, Hurd noted—were Baylor, Con Ed, Delta Dental, Ingersoll Rand, Juniper Networks, Mount Sinai Health, Sumitomo Heavy Industries, Sherwin-Williams, and Toyota Motor.
In both cloud ERP and HCM, “we’re growing faster than the market,” he said, adding that most of the recent wins were with new customers. As for migrating existing customers to Oracle Cloud applications, Hurd alluded to a new company offering that reduces by as much as 30% the time and cost of such migrations. “That opportunity,” he said, “is yet ahead of us.”
As for Oracle’s largest product line, Oracle Database, new license revenue rose 9% in the fourth quarter, Hurd said, just as the company’s self-managing, self-patching autonomous database, generally available as of the beginning of Q4, starts to “show up in our pipeline.” One big win in the quarter was Ford Motor, which is using Oracle Database both in the cloud and on its premises under a “bring your own license,” or BYOL, deal (more on that below).
“What we begin to see now in our pipelines now that the technology is literally rolling out, we’re in hundreds and hundreds of trials and proofs of concept,” Hurd said.
Oracle Executive Chairman and CTO Larry Ellison, noting that Oracle’s share of the global database market segment is considerably larger than IBM’s and Microsoft’s, said most customers will want to move that data to the Oracle Cloud. “Not move all of it at once,” Ellison said. “I mean, AT&T has actually made a commitment to move all of it in a relatively short term. Other customers are moving, but not as rapidly. And they are buying additional options for their existing licenses so they can move into the cloud and take advantage of the autonomous services.”
Ellison said Oracle is just about finished enabling all of its cloud software-as-a-service (SaaS), platform-as-a-service (PaaS), and infrastructure-as-a-service (IaaS) offerings to run alongside each other in the company’s second-generation data centers, giving the company economies of scale that should boost its cloud profit margins. Just as important, he said, that consolidation makes it easier for Oracle customers to extend their SaaS applications using the company’s latest PaaS and IaaS technologies.
“We think that’s a big deal,” Ellison said. “We think having SaaS, PaaS, and IaaS all integrated together in the same data center is the key differentiator between Oracle and our cloud competitors, most of whom are focused primarily on SaaS-only or primarily on IaaS-only.”
CEO Safra Catz noted changes to Oracle’s financial reporting to better reflect the state of its business since the company introduced the BYOL initiative to customers at the end of the second quarter.
BYOL lets customers move their existing on-premises software licenses to the Oracle Cloud so long as they continue to pay support for those licenses. As a result, companies are entering into large contracts with Oracle under which they’re deploying some of the software in the Oracle Cloud and some in their own data centers. Previously, licenses for all of that software would have been counted entirely as on premises, “which clearly it isn’t,” Catz said.
“I cannot stress enough the stability and growth of our installed base of customers quarter after quarter,” she said. “Our customers are maintaining and expanding their Oracle environments because they have portability to use our licensed software on premises, in the cloud, or via hybrid environments. This is largely because our products are capable of doing things others just can’t do, whether that’s security, performance, scalability, or the autonomous features that only our database has.”
Rob Preston is editorial director in Oracle’s Content Central organization.