Oracle’s cloud business grows – WSJ

Oracle Corp.

is making progress in its years-long transition into the cloud software market as it moves longtime enterprise customers away from the internal databases that have made Oracle an information technology powerhouse, industry analysts said .

Oracle said on Thursday that total cloud revenue rose 24% to $2.8 billion in the quarter ending Feb. 28, while enterprise-wide revenue rose 4%. compared to the previous year to reach 10.51 billion dollars.

For years, Oracle’s main line of business was licensing software for enterprise on-premises databases and providing maintenance and other services, a source of revenue that is shrinking as enterprises are closing more and more expensive servers and are beginning to rent computing capacity and enterprise software to third parties. cloud providers, as needed.

“The cloud remains a relatively small percentage of Oracle’s overall revenue thus far,” said Adam Ronthal, vice president of research at IT research and consulting firm Gartner. Inc.

“However, the cloud is clearly at the center of delivering new features and capabilities.”

Scott Bickley, senior research director at Info-Tech Research Group, said that instead of directly competing with much larger cloud rivals, Oracle has sought to retain legacy database customers by providing a cloud-based alternative. to internal systems. Most companies are hesitant to switch database vendors, which involves a massive transfer of data and applications, he said.

“They’ve seen big percentage increases in cloud databases and other services, but that’s from a low base,” Bickley said. “When you look at the market share of cloud providers, they’re barely a dot on the radar.”

Oracle is far behind cloud market leaders like Amazon.com Inc.

Amazon Web Services and Microsoft Body

Azure.

“Oracle has a strong focus on moving its on-premises application customers and its Oracle database customers to the cloud,” said Eric Newmark, group vice president for Software as a Service, Software business and the world of International Data Corp. -wide service division.

Newmark said part of Oracle’s strategy is to make migrating to the cloud as easy as possible for its customers, offering both technical and strategic support. With its own cloud infrastructure underlying its applications, he said, the company has also been able to build strength in other areas, such as its enterprise applications and vertical software tools.

Still, becoming a cloud provider isn’t cheap. Oracle’s cloud services and licensing support costs rose 23% in the third quarter, while total operating expenses rose 8% to $6.69 billion, the company said Thursday.

In December, he announced a roughly $28.3 billion deal to buy cloud-based electronic medical records company Cerner. Corp.

— Oracle’s biggest contract ever — in a move aimed squarely at accelerating its cloud computing business, analysts said. The deal is expected to close later this year.

“Our cloud business is on an absolute streak, you can see that in the numbers,” Oracle Chief Executive Safra Catz said on a conference call with analysts on Thursday. “The cloud is fundamentally a more profitable business than on-premises databases.”

However, Oracle said net profit fell 54% to $2.32 billion in the third quarter from $5.02 billion a year earlier. He blamed the loss on the falling share price of genetic sequencing company Oxford Nanopore Technologies PLC and an operating loss at chipmaker Ampere Computing. Oracle is an investor in both companies.

Ms. Catz said the company expects fourth-quarter profit of $11.56 billion to $11.79 billion.

Write to Angus Loten at [email protected]

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Margie D. Carlisle