Cloud is fundamentally more profitable than on-prem, says Oracle's Safra Catz as revenue misses mark for investors

In case you were wondering why vendors are so excited about it


Revenue growth of 4 per cent was not enough for Oracle to appease market watchers as the omnipresent software vendor's shares slumped following the release of its latest quarterly financials.

Big Red confirmed revenue went up 3.8 per cent year-on-year to $9.728bn for Q1 of its fiscal 2022 ended 31 August, yet this was lower than analysts' forecasts of $9.77bn, causing the shares to tumble 1.4 per cent.

Cloud services and licence support was up 6 per cent to $7.3721bn, cloud licence and on-premises support declined 8 per cent to $813m, hardware was down 6 per cent to $763m, and services grew 8 per cent to $781m.

On a conference call, CEO Safra Catz said application subscription revenues were $3bn, up 7 per cent, while Fusion apps (the cloud ERP suite) was up 26 per cent on the same period a year ago.

Oracle Cloud infrastructure consumption revenue, including revenue from Autonomous Database, was up 80 per cent, while the on-prem managed Cloud@Customer was up 44 per cent, she said.

But Catz confirmed exactly why Oracle – indeed most vendors – are so keen on getting their customers into the cloud as soon as possible.

"Cloud is fundamentally a more profitable business compared to on-premise," she said. Great for investors; not so good for customers receiving scary letters from Oracle licensing teams.

Net profit climbed 9 per cent for the quarter to $2.5bn.

Catz said total revenue for Q2 would grow between 3 and 5 per cent, while cloud services and licence support revenue for Q2 would increase by 5 per cent.

CTO and founder Larry Ellison took the opportunity of an investors' call to indulge himself in the usual tiresome trash-talking – with Amazon, SAP and Snowflake the most prominent targets.

But the walnut-coloured septuagenarian also suggested that Oracle's Fusion ERP – said to be rewritten for the cloud – would be a platform for launching into new markets, working with "strategic partners" and banks to develop "a new generation of cloud B2B financing and payment systems."

"If you are the largest ERP supplier, there are opportunities to go into new businesses like financing and payments with banking partners that would have been impossible with the old on-premise systems, and those are opportunities we are aggressively pursuing. Banking and healthcare will be Oracle's two largest verticals going forward," Ellison said. ®

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