Cloud, Recurring Revenue, Subscription Growth Highlight Oracle’s Q2
“I continue to have a very high level of confidence that our revenue growth will accelerate as our cloud business continues to become a much bigger portion of total revenue,” says Oracle CEO Safra Catz.
Oracle had a very good second quarter of its fiscal 2021 when it came to growth in its cloud, recurring revenue and subscription businesses, the company said Thursday.
This included growth in many of the software king’s key product lines.
Larry Ellison, co-founder and executive chairman of Oracle (pictured), told financial analysts at the company’s quarterly financial conference call that one of those products, Oracle Cloud Infrastructure, or OCI, was actually capacity-strained during the quarter.
“There was more demand than we had supply,” Ellison said. “To remedy this capacity shortfall, we are adding OCI capacity and building new OCI data centers as fast as we can. We are now up to 29 regional data centers around the world, more than AWS [has].”
OCI added customers and added revenue at a rate in excess of well over 100 percent year-over-year in the second quarter, Ellison said. Meanwhile, he said, OCI’s Oracle Autonomous Database was up by more than 50 percent.
Among several new managed services added to OCI during the quarter, the most interesting is a managed service for the open-source MySQL database, Ellison said.
“[It features] a brand-new, Oracle-developed, massively parallel query accelerator called Heatwave,” he said. “MySQL plus Heatwave processes queries hundreds of times faster--seriously, hundreds of times faster--than the current version of MySQL by itself and other MySQL-compatible databases such as Amazon’s Aurora. MySQL plus Heatwave is so much faster, so much easier to use and so much less expensive than Postgres, Redshift and Snowflake, or any other database available on Amazon AWS.”
In other product areas, Oracle’s Fusion ERP grew 33 percent year-over-year to more than 7,500 customers, while NetSuite grew 21 percent to more than 24,000 customers, Ellison said. “There is no large-scale enterprise application business in the cloud that’s growing as fast as we are,” he said.
Ellison said Oracle’s cloud ERP market leadership will grow even more in the coming months as the company unveils several large-scale SAP ERP customers who will leave SAP for Fusion ERP cloud.
“Oracle is the clear market leader in cloud ERP,” he said.
One big example of a Fusion ERP customer is Oracle itself.
Oracle CEO Safra Catz told investors that since Oracle migrated to Fusion ERP, the company has continued to close its books increasingly faster.
“This quarter, we are reporting our results for our entire global operations 10 days after the end of the fiscal quarter,” she said. “In fact, using Fusion ERP, we submit our 10K and 10Q filings faster than any other company in the S&P 500. In fact, 21 days faster than the average. Understanding our business performance sooner is an advantage that we enjoy from using Fusion ERP, and is one our Fusion customers are rapidly beginning to appreciate.”
Other parts of Oracle’s cloud and services business did very well during the quarter, Catz said.
Oracle has doubled the percentage of revenue it derives from cloud services, which in turn is driving the company’s recurring revenue as a percentage of total revenue ever higher to currently reach 73 percent of total company revenue, she said.
“We anticipate this trend to continue as cloud services continue to grow,” she said.
Subscription revenue reached $2.9 billion, up 5 percent, with strategic back office applications up 26 percent, Catz said. That also included Fusion ERP, which saw revenue rise 33 percent, NetSuite ERP up 20 percent, and Fusion ACS, up 24 percent, she said.
During the quarter, Oracle also saw infrastructure subscription revenue grow 3 percent to $4.2 billion, with database subscription revenue up 5 percent, Catz said. Consumption revenue grew 64 percent for Oracle Autonomous Database, and 139 percent for OCI, she said.
“I continue to have a very high level of confidence that our revenue growth will accelerate as our cloud business continues to become a much bigger portion of total revenue,” she said.
For its overall second quarter of fiscal 2021, which ended Nov. 30, Oracle reported total revenue of $9.80 billion, which was up a mere 2 percent over the $9.61 billion the company reported for the second fiscal quarter 2020.
The biggest component of that revenue figure, cloud services and license support, was also the only component that saw year-over-year growth. It accounted for $7.1 billion in revenue, up 4 percent over last year.
Other revenue components fell over last year. Cloud license and on-premise license revenue fell 3 percent to $1.09 billion, hardware revenue fell 3 percent to $844 million, and services revenue fell 7 percent to $752 million.
Oracle also reported GAAP net income of $2.44 billion, or 80 cents per share, up from last year’s net income of $2.31 billion, or 69 cents per share.
On a non-GAAP basis, the company reported net income of $3.2 billion, or $1.06 per share, up from last year’s $2.98 billion, or 90 cents per share.
Analysts had been expecting non-GAAP earnings per share of $1, and GAAP earnings per share of 76 cents, according to Seeking Alpha. Oracle’s revenue for the quarter beat analysts’ projections by $20 million.
For its third quarter of fiscal 2021, Oracle is expecting total revenue to grow by 1 percent to 3 percent, and non-GAAP earnings per share to grow by between 10 percent to 14 percent to between $1.06 and $1.10, Catz said. The company last year reported third fiscal quarter 2020 revenue of $9.8 million, with non-GAAP earnings of 97 cents per share.
Oracle’s stock price fell 0.42 percent to $59.48 by the close of the trading day on Thursday, before the company announced its quarterly financials, but in after-hours trading the share price rose just over 0.1 percent.