Oracle Q1 '16: Investment In Cloud Apps Is About To Really Pay Off

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Oracle saw a slight drop in its fiscal first quarter 2016 revenue, despite strong growth in its cloud business, the company said Wednesday. But the company expects revenue growth to accelerate as its cloud business grows at a stronger pace in the second quarter, thanks to customers -- many of whom have finished testing -- signing new contracts.

For its first quarter of 2016, which ended Aug. 31, Oracle reported revenue of $8.4 billion, down about 2 percent from the $8.6 billion it reported in the first fiscal quarter of 2015.

Part of that drop was caused by currency head winds, according to Oracle, which estimated that revenue increased 7 percent over 2015's same quarter in constant-currency terms.

[Related: Longtime EMC, VMware Storage Exec Chuck Hollis Jumps To Oracle]

Oracle's software revenue, which includes both cloud-based and on-premise software, reached $6.5 billion, which was down from 2015's same quarter. Included in that figure were Software-as-a-Service (SaaS) and Platform-as-a-Service (PaaS) revenue of $451 million, up 34 percent over 2015's first quarter, and cloud infrastructure as a service (IaaS) revenue of $160 million, up 16 percent.

Cloud software revenue, however, is still overshadowed by the company's on-premise software revenue of $5.8 billion, which fell 4 percent from the same quarter of 2015.

Hardware revenue in the quarter fell 3 percent, to $1.1 billion, while services revenue rose 1 percent, to $862 million.

On a GAAP basis, Oracle reported first-quarter income of $1.7 billion, or 40 cents per share, down significantly from 2015's first quarter $2.2 billion, or 48 cents per share. On a non-GAAP basis, Oracle earned $2.3 billion, or 53 cents per share, down from $2.7 billion.

Oracle reported its financials after the close of the trading day. Before the close, Oracle's shares were up slightly, to $38.35 per share, but fell after the close because revenue missed analysts' expectations, and were trading below $37.75 a couple of hours later in the after-hours trading session.

Oracle CEO Safra Catz said during the Wednesday analyst call that Oracle's on-premise software business was steady and growing modestly, but that its cloud-based business was showing much higher growth, leading to overall revenue growth going forward.

"The triple-digit growth in SaaS and PaaS revenue we've been experiencing will lead to increased growth in the second half of the year," Catz said.

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