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A third of Oracle revenue now comes from cloud services

A third of Oracle revenue now comes from cloud services

The company is betting on moving large enterprise customers from AWS and Azure to OCI in the coming quarters as cloud revenue crosses $3.6 billion in the first quarter of fiscal 2023.

After years of investments, Oracle’s bet on cloud computing has started to pay off with nearly a third of its revenue in the first quarter of fiscal year 2023 coming from cloud services. Total cloud revenue (SaaS and IaaS combined) stood at $3.6 billion in the quarter, up 50% year-on-year, without accounting for currency fluctuations.

The company expects to hit an annualized revenue run rate of more than $20 billion combining all of its cloud services, company Chairman Larry Ellison said on Monday, adding that Oracle acquired close to 1,000 new “paying” cloud customers in the last three months.

“Total cloud growth, again, including Cerner, is expected to grow from 46% to 50% in constant currency, 42% to 46% in USD. I expect that total cloud growth for the fiscal year, excluding Cerner, will be above 30% in constant currency,” said Safra Catz, chief executive officer at Oracle, during an earnings call. Oracle’s $28.3 billion acquisition of healthcare IT company Cerner closed in June.

For the quarter ended August 31, the company reported a total revenue of $11.4 billion, up 23% year-on-year. In the same period last fiscal year, the company had reported a total revenue of $9.7 billion.

Oracle sees growth in all segments of cloud computing

Oracle has been seeing rapid growth in all subsegments of cloud computing. Oracle’s cloud revenue includes IaaS and SaaS. IaaS includes revenue from Oracle Cloud Infrastructure (OCI), Oracle Cloud at Customer and Autonomous Databases, whereas SaaS includes revenue from Oracle Fusion, Netsuite and other services.

For the quarter under review, Oracle said IaaS revenue stood at $900 million, up by 58% year-on-year without taking in the effect of currency fluctuations and excluding any contribution from Cerner.

OCI consumption in the quarter increased 104% year-on-year, followed by Oracle Cloud at Customer and Autonomous Databases consumption showing an increase of 92% and 56% year-on-year respectively, the company said.

This growth, according to Catz, can be attributed to the growth in demand for OCI that the company has been seeing since April this year, and a new sales strategy.

The company, over the last two years, has invested in hiring engineering talent in the field to help customers bring workloads to OCI, Catz said, adding these employees tailor these migrations in the most cost-effective manner.

In fact, Oracle seems confident that it will bring customers from rivals such as AWS and Azure to OCI, as soon as the next quarter.

“I personally have been talking to some of Amazon’s most famous brands (noticeable enterprises that use AWS services currently) that are running at AWS. And the AWS build is getting very large, and they can save a huge amount of money by moving to OCI. And I expect next quarter, we will be announcing some brands, some companies moving off Amazon to OCI that will shock you,” said Ellison during the company’s earnings call.

The Oracle chairman reiterated the statement when asked about OCI’s go-to-market strategy during the same call.

Government organizations such as UK Home Office and enterprises across the world such as Brazilian fintech Banco Digi+, Saudi Arabian financial service provider Al Yusr and several other companies have moved workloads to OCI in the last three months, the company said.

Oracle expects to hit an annualized revenue of $3.2 billion for IaaS, including OCI, Oracle Cloud at Customer, and Autonomous Databases.

The company’s total infrastructure subscription revenue including support (cloud and on-premises) stood at $4.4 billion for the quarter, up 7% in constant currency and excluding any contribution from Cerner.

Fusion applications, NetSuite continue to grow

Fusion applications such as enterprise resource planning (ERP) and human capital management (HCM), along with NetSuite ERP, continued to drive revenue momentum for Oracle and the company expects to hit an annualized revenue of $5.8 billion from these services.

“Our strategic back-office cloud applications now have annualized revenue of $5.8 billion and grew 33% in constant currency, including Fusion ERP, which was up 38%, NetSuite ERP up 30%, and Fusion HCM up 26%,” Catz said during the earnings call.

The growth in these services, according to the chief executive, can be attributed to cost savings in back office due to their direct implementation across enterprises.

For its first quarter as part of Oracle, Cerner chalked up $1.4 billion in revenue and the company claims that it is the best revenue quarter for the company since its inception.

Oracle expects Cerner to drive more revenue in the coming quarters as it completes its full integration.

Oracle’s profits are declining

Although Oracle beat estimates to reach record revenue in the first quarter of fiscal 2023, net profit slowed due to higher operating expenses, led by sales, marketing and research and development.

The company reported an operating expense of $8.8 billion against $6.3 billion for the same quarter last year.

Net income for the company stood at $1.5 billion against $2.4 billion for the corresponding period last year.