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Oracle Sales Stagnant In Q3, But Fusion And NetSuite Business Application Suites Booming

CTO Larry Ellison told investors that ‘Oracle's future rests on two strategic businesses: cloud applications and cloud infrastructure.’

Oracle's revenue remained stagnant in its third fiscal quarter, but the company saw encouraging performance in its two next-generation ERP suites as it refocuses its business on cloud applications and infrastructure services, Oracle leaders said Thursday in an earnings call.

The Redwood Shores, Calif.-based technology giant saw hardware sales continue falling as its higher-margin cloud business made up for the slack in the quarter that ended Feb. 28, doubling where it was three years earlier.

"Oracle's future rests on two strategic businesses: cloud applications and cloud infrastructure," Oracle Chairman and CTO Larry Ellison told investors.

[Related: Warren Buffett On Oracle Exit: ‘I Don’t Think I Understand Exactly Where The Cloud Is Going’]

The company reported Q3 2019 total revenue of $9.6 billion—a 1 percent decline when not adjusted for currency fluctuations.

Cloud Services and License Support, an accounting category that encompasses all subscription revenue, contributed $6.7 billion, and licenses sold in the cloud or on-premises brought in another $1.3 billion.

In Q2, those categories notched $6.6 billion in revenue and $1.2 billion respectively.

The entire software portfolio, including cloud services and licenses, came in flat year-over-year, when not adjusted for constant currency.

That software business is "extremely stable and resilient," co-CEO Safra Catz said on the earnings call, even as Oracle transitioned to a focus on Software-as-a-Service, replacing non-recurring sales for subscription ones.

Oracle's enterprise and mid-market cloud application suites were a bright spot, with strong performance across the Fusion and NetSuite lines, Ellison said.

"Both are growing very rapidly," Oracle's founder told investors. Fusion and NetSuite are gaining market share because customers prefer an integrated approach that brings together sales, service, HR, financials, supply chain and manufacturing.

Fusion saw 32 percent growth in Q3; NetSuite 30 percent.

Ellison also said Oracle's Infrastructure-as-a-Service offering, OCI, is "highly differentiated from AWS."

Oracle is the only cloud infrastructure provider, he said, to make the cloud control code entirely inaccessible to customers, offering a unique level of protection.

Increasingly driving customers to OCI is the Oracle Autonomous Database, which is impressing customers by its ability to respond to security threats by automatically patching itself while applications remain running.

Oracle now has roughly 1,000 customers using the autonomous database products, with 4,000 conducting field trials.

While many factors are driving adoption, Ellison said he sees customers often stunned they can get a dataset running in five minutes.

OCI, featuring those autonomous databases, is shifting the focus of the company's infrastructure business to the cloud, he said.

Earnings-per-share of 87 cents beat consensus forecasts of 84 cents. Revenue also beat Wall Street expectations of $9.58 billion.

Oracle stock closed Thursday on the New York Stock Exchange at $53.05, then wobbled after-hours, settling at $51.25 at the time of this publication.

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