Oracle cloud growth up 19% but it's still a market minnow

Acquisition of health data specialist Cerner adds $15.8b to Big Red's debt


Oracle has impressed the markets with strong revenue growth for cloud infrastructure and applications-as-a-service.

However, Oracle is still struggling to gain a larger share of the global cloud market, where it lags behind AWS, Microsoft Azure, and Google Cloud.

Big Red's total revenue for Q4, which ended May 31, hit $11.8 billion, up 5 per cent on the same period a year ago. Total cloud revenue, including infrastructure and software-as-a-service, reached $2.9 billion, up 19 percent. Cloud ERP Fusion revenue increased 20 percent while NetSuite ERP cloud revenue grew 27 per cent.

For fiscal 2022, total revenues were up 5 per cent to $42.4 billion. Cloud services and license support revenues increased by the same amount to $30.2 billion while cloud license and on-premises license revenues grew by 9 percent to $5.9 billion.

Oracle CEO Safra Catz told investors that growth in software was driving spending on its Oracle Cloud Infrastructure. "Fusion customers are buying OCI. OCI customers are buying Fusion and NetSuite. Database customers are moving to autonomous on OCI. Industry vertical customers are going all in on Fusion. Going forward and despite the macro environment, we continue to expect the revenue growth in our cloud business will accelerate substantially in fiscal year '23."

Investors reacted positively to Oracle's results. In extended trading shares rose 13 per cent following a day during which the stock market as a whole plunged and Oracle's stock hit a 16-month low.

The company also detailed plans following the closure of its acquisition of Cerner, a global provider of electronic health records, which added $15.8 billion to Oracle's debt.

"We are reviewing their entire product portfolio to identify areas where we can include Oracle technology rather than third-party products as well as moving them to OCI," Catz said on an earnings call.

"These efforts will deliver a more stable, secure and innovative product portfolio for customers while using less third-party products. We remain confident in our ability to grow Cerner's top line and bottom line faster than they were able to do so on their own as these changes are implemented."

Last week, a former Oracle executive who now advises on software licensing warned that the software giant would follow a well-rehearsed acquisition playbook to try to increase revenue from Cerner, including terminating unprofitable contracts and using end of support as leverage to increase fees.

While Oracle's cloud growth nearly hit 20 percent, including SaaS, for context, the cloud market as a whole grew 34 percent in Q1 2022 to hit $55.9 billion, according to April figures from tech research firm Canalys.

The top three cloud service providers – AWS, Microsoft Azure, and Google Cloud – added 42 percent in sales collectively over the last year as their share of the market hit 62 percent, the research company said.

According to figures from Synergy Research, Oracle's share in the global cloud infrastructure market sat at around 2 percent in 2021 and was expected to fall. ®


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