Initial excitement over Oracle’s Q114 results which made it past street expectations on earning was quickly quelled when management got to the Q2 forecast. The result was a c6% decline in the share price in after-hours trading. It was not as bad as the response to its flat Q4 (see here) but highlights the struggle Oracle has as the threat level from cloud competitors increases.
Revenue was up 2% (4% cc) yoy to $8.4bn against street expectations of $8.48bn. New software licence and cloud subscription revenue was up a respectable 5% (7% cc) to $1.7bn, with updates and support up 7% (8% cc) to $4.4bn. That’s not bad compared to SAP who saw software license sales fall 7% (3% cc) in its most recent quarter (see here). Oracle attributes growth to execution which is a sign it is getting back into shape after the sales operation disruption of last year. However, the Q1 performance bar was not set high.
Traditional database products were singled out as achieving double digit growth which makes sense in the current data-intensive environment but begs the question over in-memory product sales. There was no mention of Fusion in the application space which may not be a good sign. Cloud subscriptions are said to be growing strongly but there were no numbers to provide insight.
Net income was up 8% (10% cc) to $2.2bn although operating income was flat at $2.9bn and the operating margin dropped one percentage point to 34%. But it was the Q2 forecast that did the damage – new software license and cloud subscription revenue in the -6% to +4% range and total revenue of -1% to +2%. With the subscription model eating into Oracle from inside and cloud competitors from the outside life is not going to get any easier.