Oracle announced its quarterly results with revenues at $9 billion, down 3% in comparison to the same period last year, though the cloud business recorded growth of 40%.
The company missed analyst expectations for total revenues, though earning per share was up at $0.64 versus the estimates of $0.62. Oracle played up growth in its cloud business, particularly PaaS and SaaS, where revenues were up 57% to $583 million. Total revenues for the cloud business stand at $735 million, though IaaS earnings were down 2% to $152 million.
“Our Cloud SaaS and PaaS revenue growth rate accelerated to 61% in constant currency in Q3,” said Oracle CEO, Safra Catz. “This dramatic revenue increase drove our non-GAAP SaaS and PaaS gross margins up to 51% in Q3 as compared with 43% in Q2. Our cloud business is now in a hyper-growth phase. Our gross margins are climbing toward our target of 80%.”
Although generally considered in the industry to be playing catch up, Oracle has been demonstrating healthy growth over recent months in comparison to competitors. The company claims that it grew twice as fast as Workday and three times faster than Salesforce.com, with the latter receiving particular attention on the earnings call.
“Oracle is now selling more new SaaS and PaaS annually recurring cloud revenue than any other company in the world including Salesforce.com,” said CTO Larry Ellison “We are growing much faster than Salesforce.com, more than twice as fast. Because we sell into a lot more SaaS and PaaS market than they do. We compete directly with Salesforce.com in every segment of the SaaS customer experience market including sales, service and market.”
Ellison also highlighted the potential for future growth in the SaaS segment, where Oracle operates in markets Salesforce.com doesn’t, in particular enterprise resource planning, ERP, and human capital management, HCM. The company is seemingly adamant in beating Salesforce.com at its own game to become the largest SaaS and PaaS company worldwide.
“Oracle Fusion ERP is the overall market leader in the enterprise cloud ERP market. I should say we have more than 10 times the number of ERP customers than Workday. And ERP has always been a much larger market than CRM. Salesforce.com is missing all of that ERP market opportunity,” said Ellison. “And that in term it should make it easy for Oracle to pass Salesforce.com and become the largest SaaS and PaaS cloud company in the world.”
The company anticipates growth will continue in the next quarter, though analysts anticipate a number of challengers to Oracle’s retained customers over the coming months. With competitors, including AWS and Microsoft, expanding their offering in the database business, the flexibility of Oracle’s proposition and pricing could be called into question.
“People are coming after us, because we are by far the market leader in database. If you’re in the database business, the only one you can come after is us,” said SVP Investor Relations, Ken Bond “So, of course, Amazon, they’re going to be in the database business too is coming after us, and of course Microsoft wants to be bigger in the database business, they have to come after us.”