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Mixed bag for Oracle’s Q1 results

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The strengthening of the US dollar compared to foreign currencies had a significant impact on Oracle’s results for the first quarter of 2016.
Total revenues were $8,4-billion, down 2% in US dollars but up 7% in constant currency. Cloud plus on-premise software revenues were $6,5-billion, down 2% in US dollars and up 6% in constant currency. Total cloud revenues were $611-million, up 29% in US dollars and up 34% in constant currency. Cloud software as a service (SaaS) and platform as a service (PaaS) revenues were $451-million, up 34% in US dollars and up 38% in constant currency. Cloud infrastructure as a service (IaaS) revenues were $160-million, up 16% in US dollars and up 23% in constant currency. Total on-premise software revenues were $5,8-billion, down 4% in US dollars but up 4% in constant currency. Total hardware revenues were $1,1-billion, down 3% in US dollars but up 6% in constant currency. Total services revenues were $862-million, up 1% in US dollars and up 10% in constant currency.
Operating income was $2,7-billion and operating Margin was 31%. Non-GAAP operating income was $3,5-billion and non-GAAP operating margin was 41%. Net income was $1,7-billion while non-GAAP net income was $2,3-billion. Earnings per share was $0.40, while non-GAAP earnings per share was $0.53. Without the impact of the U.S dollar strengthening compared to foreign currencies, Oracle’s reported Q1 GAAP and non-GAAP earnings per share would have been 6 cents higher.
Short-term deferred revenues were $9,1-billion, up 2% in US dollars and up 10% in constant currency compared with a year ago. Operating cash flow on a trailing 12-month basis was $13,5-billion.
“Our traditional on-premise software business plus our new cloud business grew at a combined rate of 6% in constant currency,” says Oracle CEO, Safra Catz. “This growth is being driven by new SaaS and PaaS annual recurring cloud subscription contracts which almost tripled in the quarter. As our cloud business scales-up, we plan to double our SaaS and PaaS cloud margins over the next two years – starting from 40% this just completed Q1, to approximately 60% this coming Q4, and then on up to 80% two years from now. Rapidly growing cloud revenue combined with a doubling of cloud margins will have a huge impact on EPS growth going forward.”
“In Q1 SaaS and PaaS revenue was up 38% in constant currency – in Q4 that revenue growth rate will be over 60%,” says Oracle CEO, Mark Hurd. “That cloud revenue growth rate is being driven by a year-over-year bookings growth rate of over 150% in Q1. Our increasing revenue growth rate is in sharp contrast to our primary cloud competitor’s revenue growth rates which are on their way down.”
“We are still on target to book between $1.5 and $2.0 billion of new SaaS and PaaS business this fiscal year,” says Oracle executive chairman and CTO Larry Ellison. “That means Oracle would sell between 50% more and double the amount of new cloud business than salesforce.com plans to sell in their current fiscal year. Oracle is the world’s second largest SaaS and PaaS company, but we are rapidly closing in on number one.”