Oracle Cloud, License Demand Drives Strongest Organic Growth in Over 10 Years

Growing Oracle Cloud activity and a licensing boom to tie businesses to enterprise technology have given Oracle its strongest organic growth in more than a decade and a quarter of significant fiscal year 2022 compared to expectations.

On Monday, Oracle CEO Safra Catz, in her prepared remarks on Oracle’s fourth quarter fiscal 2022 financial analysts’ conference call, told analysts that Oracle had a strong quarter across the board. domains, with a total turnover up 10% compared to the previous year.

“[Revenue had] the highest organic growth we’ve seen since 2011 and $240 million above the high of my current constant currency forecast,” Catz said. “Earnings were as strong as EPS [earnings per share] was 20 cents above the upper forecast range. What the fourth quarter demonstrates is that our business is accelerating. »

[Related: Oracle’s Larry Ellison Hits AWS On Cost, Security As He Pounces On Rivals]

Oracle’s growth is unleashed as companies, especially during the pandemic, have found reasons to make greater use of the company’s technologies to modernize their operations, Catz said.

“These customers then become bigger customers of Oracle,” she said. “Fusion customers buy OCI (Oracle Cloud Infrastructure). OCI customers buy Fusion and NetSuite. Database clients move to Autonomous on OCI. Vertical industry customers choose Fusion. We have real momentum everywhere. Going forward, and despite the macroeconomic environment, we continue to expect our cloud business revenue growth to accelerate significantly in fiscal 2023.

Oracle co-founder, executive chairman and chief technical officer Larry Ellison (pictured) said during his prepared remarks that the company was laying the groundwork to accelerate its cloud revenue growth.

It starts with Oracle’s two most important verticals, healthcare and financial services, Ellison said.

Oracle’s $28 billion acquisition of AWS partner and healthcare technology developer Cerner, which closed this month, gives Oracle the opportunity to build a comprehensive suite of applications for all of the health ecosystem, Ellison said.

Oracle is modernizing Cerner’s clinical systems with features such as a voice user interface and applications such as disease-specific AI models; adding a network of IoT devices to improve diagnostics and patient monitoring; add administrative systems to manage the recruitment, scheduling and compensation of contract workers such as doctors and nurses; simplify inventory control; add RFID tags and cards to cell phones; and automate payment authorization and billing systems, he said.

“We can do all of this and more because we’re building these healthcare applications using the latest and most productive cloud technologies, namely the Oracle Autonomous Database and low-power programming language. Apex code,” he said. “With these tools, security and reliability are built into the technology platform, not the application.”

On the financial services side, Oracle is working with major banks and leading logistics companies to automate B2B commerce directly from Oracle ERP Cloud, Ellison said. For example, he said, a hospital looking to purchase an X-ray machine can enter a purchase requisition into its Oracle ERP Procurement system, which then sends that order directly to the company’s Oracle ERP Order Management system. vendor and automatically generates a loan request from that hospital’s preferred bank, after which the vendor can use their Oracle ERP order management system to check product availability and submit a shipment request.

The entire B2B commerce process is automated in Oracle Cloud, Ellison said.

“B2B commerce automation is another huge opportunity for Oracle,” he said. “We already have over 30,000 ERP Cloud customers, including many of the world’s largest banks and leading logistics companies.”

Asked by an analyst how Oracle cloud and on-premises licensing revenue grew 18% year-over-year in the fiscal fourth quarter, Ellison said that with the exception of Workday , most major application and SaaS companies such as Oracle database for use in the cloud.

“Some licenses, you know, are typically used on-premises, but a lot of the new licenses we’re selling allow our customers to…run them in the cloud, whether it’s our cloud or other people’s clouds, or in the case of Salesforce in their own cloud,” he said. “So Oracle Database is still the number one database in the world by a significant margin. number one in the cloud when you start counting all the SaaS companies that use the Oracle database.

Asked by another analyst what’s driving Oracle’s licensing growth, Catz said that large companies understand that having an unlimited agreement for a certain period of time gives them significant flexibility.

“Any large database user who doesn’t have an unlimited deal with us really isn’t optimizing their spend because it gives them incredible flexibility,” she said. “They can use onsite for as long as they need. They can migrate to the cloud and get a much lower price in the cloud with BYOL [bring your own license]and they can come and go.

When another analyst asked if Oracle’s cloud ERP business could be affected by an economic downturn, Ellison replied that cloud systems cost less than on-premises systems to operate while providing better insights.

He also said that small businesses continue to actively invest in the cloud, including Oracle’s NetSuite ERP technology for small businesses.

“We got the most revenue we’ve ever gotten from NetSuite in the last quarter, and the highest growth rate we’ve ever gotten from NetSuite in the last quarter,” he said. “[Smaller businesses] accelerate in the recession. Because, we think, the benefits are enormous. And it allows companies to be more competitive. And again, we don’t see this activity slowing down. On the contrary, we see our ERP business, both Fusion and NetSuite, accelerating despite the macroeconomic situation.

For its fourth quarter of fiscal 2022, ended May 31, Oracle reported total revenue of $11.84 billion, up 5% from the company’s reported $11.23 billion. for its fourth quarter of fiscal 2021. That beat analysts’ expectations of $190 million, according to Seeking Alpha.

This included cloud services and license support revenue of $7.62 billion, up 3%; cloud license and on-premise license revenue of $2.54 billion, up 18%; hardware revenue of $856 million, down 3%; and services revenues of $833 million, up 3%.

Broken down another way, Oracle reported cloud revenue, including IaaS and SaaS, of $2.9 billion, up 19%; infrastructure cloud revenue up 36%; Sales of Fusion ERP SAS up 20%; and NetSuite ERP SaaS revenue up 27%.

For the quarter, Oracle reported GAAP net income of $3.19 billion or $1.16 per share, down from net income of $4.03 billion or $1.37 per share. last year. On a non-GAAP basis, Oracle reported net income of $4.24 billion or $1.54 per share, down from $4.52 billion or $1.54 per share. last year. Those non-GAAP earnings beat analysts’ expectations of 16 cents per share, according to Seeking Alpha.

For the full fiscal year 2022, Oracle reported revenue of $42.44 billion, up 5% from $40.48 billion last year. Cloud services and licensing support revenue increased 5% to $30.17 billion, cloud licensing and on-premises licensing revenue increased 9% to $5.88 billion, revenue hardware fell 5% to $3.18 billion and services revenue rose 6% to $3.21 billion.

For the year, Oracle reported GAAP net income of $6.72 billion or $2.41 per share, down significantly from the $13.75 billion or $4.55 per share it reported. reported for fiscal year 2021. On a non-GAAP basis, Oracle reported revenue of $13.66 billion or $4.90 per share, down from $14.13 billion in last year or $4.67 per share.

Looking ahead, Catz said Oracle was optimistic about its business momentum despite increasing macroeconomic uncertainty. Oracle expects its cloud business revenue to grow organically by more than 30% in fiscal 2023. The company also expects double-digit organic growth in its cloud service revenue and license support.

For its first quarter of fiscal 2023, total revenue, including the Cerner acquisition, is expected to grow between 20% and 22% year-over-year, Catz said. First-quarter cloud revenue is expected to grow 25% to 28% excluding Cerner revenue, or between 47% and 50% including Cerner, she said.

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