Oracle Cloud Sales Soar In Q2, But Overall Revenue Remains Flat

Sales of Oracle cloud software soared 62 percent in the company's second fiscal quarter, exceeding $1 billion for the first time. But declining sales of the company's on-premise software products resulted in overall flat revenue for the quarter.

The results come on the heels of Oracle's $9.3 billion acquisition of cloud application developer NetSuite in early November, which will add to Oracle's Software-as-a-Service revenue growth.

For the fiscal 2017 second quarter ended Nov. 30, Oracle reported total revenue of $9.04 billion, up a fraction of 1 percent from $8.99 billion in the same quarter one year earlier. Net income was $2.03 billion, down 8 percent year over year from $2.20 billion. Earnings per share were 48 cents compared with 51 cents one year ago.

[Related: Oracle Scoops Up Dyn, At Center Of Recent Massive DDoS Attack, To Boost Its Cloud Computing Platform]

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"Our pivot to the cloud has been phenomenal. We continue to see accelerating growth rates in our cloud business while our key competitors are slowing down," said Co-CEO Safra Catz during an earnings call Thursday. "But more importantly, the increase in revenue from our cloud business is starting to overtake our new software license [revenue] decline."

Total cloud revenue for the quarter was $1.05 billion, up 62 percent from $649 billion in the fiscal 2016 second quarter. Cloud Software-as-a-Service and Platform-as-a-Service revenue reached $878 million, up 81 percent from $484 million one year ago. Cloud Infrastructure-as-a-Service revenue was $175 million, up 6 percent from $165 million one year earlier.

Catz said NetSuite became part of Oracle on Nov. 7, so Oracle's second-quarter results included less than a month of NetSuite sales.

NetSuite reported that sales in its third quarter ended Sept. 30, the company's last full quarter before the Oracle acquisition, reached $243.9 million.

Oracle's revenue from on-premise new software licenses was $1.35 billion, down 20 percent from $1.68 billion one year earlier. Combined with on-premise license updates and product support, total on-premise software revenue was $6.12 billion in the quarter, down 4 percent from $6.36 billion one year before.

Catz predicted that in 2017 cloud revenue would exceed new software license sales. She also said that Oracle's earnings, which have been pinched in recent years because of the company's heavy investments in cloud software development and infrastructure, will begin to return to historical growth rates.

SaaS and PaaS deferred revenue in the quarter was $1.6 billion, according to Catz, up 51 percent year over year. SaaS and PaaS billings were up 39 percent in the quarter.

"Cloud is now really two-thirds of our new customer wins," Oracle Co-CEO Mark Hurd said during the earnings call.

Chairman and CTO Larry Ellison, also speaking on the call, said that while Oracle traditionally compared its results to SAP in software and IBM in hardware and infrastructure, the company now sees in cloud applications and Amazon Web Services in cloud infrastructure and services to be its main rivals.

Revenue from hardware products and support was $1.01 billion, down 10 percent from $1.12 billion one year ago.

For the current fiscal 2017 third quarter, Catz said total revenue is expected to grow between 3 percent and 5 percent and earnings per share would be in the range of 61 cents to 64 cents.