Oracle Corp. co-founder and executive chairman Larry Ellison predicted three months ago the company's cloud-infrastructure business would \"soon\" grow faster than its other web-based, on-demand applications and services. <\/p>\n
He didn't say then when soon would be. But it wasn't three months. <\/p>\n
On Wednesday, Oracle reported fourth-quarter results that topped analysts' expectations, sending its stock soaring in after-market trading. The company also changed the way it reports its cloud-computing business. <\/p>\n
Oracle is mixing its nascent infrastructure-as-a-service business, where it provides computing resources and storage on demand, with its more tenured business of selling access to app-management and data analytics tools, called platform-as-a-service. <\/p>\n
In its fiscal fourth quarter, Oracle posted solid results in its cloud-infrastructure business, where it competes against leaders Amazon.com Inc., Microsoft Corp. and Alphabet Inc.'s Google. Revenue from the business rose 23% to $208 million. <\/p>\n
The Redwood City, Calif., company's platform-as-a-service business, combined with its other cloud business that sells access to applications -- known as software-as-a-service -- saw revenue climb 67% to $1.15 billion for the quarter ended May 31. <\/p>\n
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Going forward, it isn't clear whether Oracle will continue to break out its progress in the cloud-infrastructure market. On a call with analysts, co-Chief Executive Safra Catz said Oracle combined its platform and infrastructure cloud businesses because \"synergies and cross-selling between these two businesses is very high.\" <\/p>\n
Over all, Oracle earned a profit of $3.23 billion, or 76 a share, in its fiscal fourth quarter, up from $2.81 billion, or 66 cents a share, a year earlier. The company said adjusted per-share earnings, which commonly exclude stock-based compensation and other items, were 89 cents. <\/p>\n
Revenue rose 2.8% to $10.89 billion. Excluding the impact of a strong U.S. dollar, revenue would have grown 4%, the company said. <\/p>\n
According to estimates gathered by S&P Global Market Intelligence, analysts expected Oracle to earn 78 cents a share on an adjusted basis, on revenue of $10.45 billion. Shares jumped 9.5% to $50.18 in recent after-hours trading. <\/p>\n
Mr. Ellison has made building the cloud-infrastructure business one of Oracle's key missions, saying last summer \"Amazon's lead is over\" after introducing Oracle's latest technology for the market. <\/p>\n
Amazon, though, continues to pull away. Its Amazon Web Services unit, whose net sales are largely comprised of its cloud-infrastructure business, grew 43% in the most recent quarter to $3.66 billion. <\/p>\n
To keep pace with rivals in the cloud-infrastructure market, Oracle will need to meaningfully expand its capital spending and operating expenses, Stifel Nicolaus & Co. analyst Brad Reback recently wrote in a report. <\/p>\n
Last year alone, Amazon, Microsoft and Google spent a combined $31.54 billion in 2016 on capital expenditures and leases, much of that on data centers to deliver cloud-infrastructure services. <\/p>\n
Oracle spent $2.02 billion on capital expenditures, up from $1.19 billion a year earlier. That, in part, led to operating margins of 34%, compared with 43% in the previous fiscal year. The company has said it doesn't believe it needs to spend as much as rivals to catch up, arguing its technology is superior. <\/p>\n
Mr. Reback, though, believes that the company will invest more in data centers to compete in the cloud-infrastructure market. <\/p>\n
\"They will need to continue to spend $2 billion or higher a year,\" Mr. Reback said in an interview. <\/p>\n
Growth in Oracle's entire cloud business is outpacing the decline in its legacy business of selling licenses to software customers run on their own servers. The cloud business grew $502 million year-over-year while Oracle's new software-license revenue fell $140 million. It is the fourth-consecutive quarter in which Oracle's cloud-revenue gains outpaced declines in its legacy software business. <\/p>\n
Over all, revenue from new software licenses fell 5% to $2.63 billion. <\/p>\n
The biggest piece of Oracle's software business remains its massive software-license updates and product-support operations. That segment generated $4.9 billion in revenue, a 2% gain from a year earlier. <\/p>\n
Write to Jay Greene at Jay.Greene@wsj.com<\/a> <\/p>\n (END) Dow Jones Newswires <\/p>\n June 21, 2017 17:45 ET (21:45 GMT) <\/p>\n <\/p>\n Read the original: <\/p>\n Cloud-Computing Business Lifts Oracle's Profit -- Update - Fox Business<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" Oracle Corp. co-founder and executive chairman Larry Ellison predicted three months ago the company's cloud-infrastructure business would \"soon\" grow faster than its other web-based, on-demand applications and services. Continue reading