Net-sweet! Oracle cloud shows growing signs of life, just don't ask about the on-prem stuff

Meanwhile, database giant preps free as-a-service program to entice developers

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Database giant Oracle beat market expectations for its fiscal Q4 2019 and FY 2019 financial results, reporting $11.1bn in quarterly revenues and $39.5bn for the full year.

The better-than-anticipated revenue represents an increase of one per cent, or four per cent in constant currency, over fiscal Q4 2018 and a nominal increase, or three per cent in constant currency, over FY 2018, according to company figures [PDF] out Wednesday.

Wall Street analysts, on average, had projected $10.95bn for the quarter and $39.32bn for the year.

GAAP earnings per share for the final quarter, ended May 31, came in at $1.07, which matched average analyst predictions; non-GAAP Earnings Per Share was $1.16.

Over the past two years, Oracle has beaten EPS estimates consistently and revenue estimates most of the time. And as tends to happen in such circumstances, Oracle's stock perked up, rising almost five per cent in after-hours trading today following the release of its FY 2019 figures.

"In Q4, our non-GAAP operating income grew seven per cent in constant currency – which drove EPS well above the high end of my guidance," said Oracle co-CEO Safra Catz in a statement. "Our high-margin Fusion and NetSuite cloud applications businesses are growing rapidly, while we downsize our low-margin legacy hardware business."

Catz said Q4's non-GAAP operating margin of 47 per cent represented the highest Oracle has seen in the past five years.

The company's Q4 GAAP operating income rose two per cent to $4.3bn; Q4 GAAP net income was $3.7bn, up 14 per cent or 19 per cent in constant currency.

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For the quarter, Oracle's Cloud Services and License Support revenues hit $6.8bn, flat compared to Q4 FY 2018 or a three per cent increase in constant currency. Cloud License and On-Premise License revenues managed $2.5bn, up 12 per cent or 15 per cent in constant currency. Hardware slipped to $994m, a decrease of 11 per cent or eight per cent in constant currency. Services came in at $823m, down seven per cent or four per cent in constant currency.

For the year, Cloud Services and License Support revenue was $26.7bn, up two per cent or four per cent in constant currency over fiscal 2018. Cloud License and On-Premise License was $5.8bn, up one per cent or four per cent in constant currency. Hardware was $3.7bn, down seven per cent or five per cent in constant currency. And Services achieved $3.2bn, down five per cent or two per cent in constant currency.

In FY 2019, Oracle's revenue growth was zero per cent in US dollars or three per cent in constant currency. Net income for the full year was $11.1bn, GAAP, up 209 per cent on last year when it took a large tax-related charge that hit the bottom line. Non-GAAP profit was $13.1bn, up two per cent.

Oracle's Fusion ERP and HCM cloud application suites saw 32 per cent revenue growth in FY19, said co-CEO Mark Hurd, and NetSuite ERP cloud application revenues also grew by 32 per cent.

On a conference call with analysts, Catz emphasized that customers are investing in Oracle platforms. "Our customers are maintaining and expanding their Oracle environment," she said, adding that the tech giant's overall customer base is growing at an accelerating rate.

She pointed at Oracle's recent deal to link its cloud to Microsoft Azure as a source of that acceleration.

The company's Q4 non-GAAP operating margin of 47 per cent, she said, is the highest the company has seen in five years. In GAAP terms, its operating margin was 38 per cent.

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For FY 2019, GAAP margin was 34 per cent and non-GAAP was 44 per cent. The company's highest previous non-GAAP margin was 47 per cent and Catz said Oracle expects to surpass that in coming years.

Part of Oracle's stock performance can be attributed to aggressive repurchasing of company stock. Catz said over the past 12 months, Oracle has repurchased 734m shares worth $36bn.

Oracle chairman Larry Ellison said his corporation added over 5,000 customers doing Autonomous Database trials in the company's Gen 2 cloud, without providing details about how many of those trials can be expected to turn into recurring revenue. "No other cloud infrastructure provides anything close to these autonomous features," he said.

In answer to an analyst question about what Oracle is doing to woo developers, Ellison said developers have always been the foundation of Oracle's business, adding that the company is putting the finishing touches on a program that will be introduced at Oracle Open World that provides "basically free services for developers forever." ®

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