Oracle provided a ray of hope by delivering impressive results for its fourth quarter of fiscal 2022 fueled by increased momentum of Oracle Cloud Infrastructure, durability in its cloud ERP business, along with its latest drive to penetrate strategic verticals.
Despite a looming recession amid a hyperinflationary environment, Oracle posted significant quarterly growth in constant currency across its four lines of business – cloud recurring revenues, license sales, hardware and services – suggesting that its uninterrupted R&D investments are paying off in spades.
Its cloud recurring revenues – mostly deriving from Oracle Fusion Cloud Applications and software maintenance contracts – edged up 7% in 4QFY22, driven by a 23% jump in Oracle Fusion Cloud ERP sales and a 30% increase in NetSuite revenue. Another key contributor to its cloud recurring revenue was the long-awaited bump from its Oracle Cloud Infrastructure business, which spiked 39% in the latest quarter.
This was also the first time in three years that Oracle has broken out the individual performance of OCI by unbundling it from its Autonomous Database, underscoring the Oracle’s IaaS business has reached a critical mass on its own.
A stronger than expected catalyst for the quarter was the record 25% increase – the biggest improvement since 2017 – in its license sales aided by the flexibility of its BYOL arrangement, according to Oracle CEO Safra Catz. The growing popularity of BYOL allows its customers to enter into new enterprise license deals to run its Autonomous Database by using on-premise credits for multi-cloud deployment.
For the second quarter in a row, its hardware sales – attributable to Exadata for powering its Oracle Cloud Infrastructure – rebounded by posting a 2% rise in the latest quarter. That suggests its hardware and OCI operations are reinforcing each other to facilitate cloud region expansion and client migration to its hyperscaler. Catz expects the hardware business to continue to gain ground as its supply chain constraints begin to ease.
Lastly, its services business ended fiscal 2022 with a 7% increase after a 11% jump in the third quarter. That underscores its burgeoning product sales have given extra runway for its professional services operations to recoup after the pandemic-induced slowdown in 2021.
Oracle’s total revenues for the quarter soared 10% to reach $11.8 billion, excluding the estimated $100 million that it had to write off because of the conflicts in Eastern Europe, which prevented the software maker from conducting business in Ukraine, while suspending its operations in Russia. Catz expects that the full year effects from the war to be around $400 million in FY23.
The 7% jump in FY22 total sales represents the highest top line growth over the past 10 years as Catz predicts more growth to come because of sales acceleration in its cloud infrastructure products and contributions from its acquisition of Cerner, which closed in early June.
Larry Ellison, chief technology officer of Oracle, said the latest results reflect the growing acceptance of its cloud applications especially in competitive wins with key and new accounts favoring Oracle over rivals in strategic verticals like banking and financial services as well as healthcare, which will be further strengthened with the Cerner purchase.
For the current fiscal 2023, Catz expects Oracle’s total revenues to jump up to 22% approaching $52 billion, compared with $42.4 billion last year, while its cloud business with incremental subscription sales from Cerner’s Cloud administrative and revenue cycle management applications could expand by up to 50% in FY23.
The acquisition of Cerner helps Oracle compete with Microsoft to become the No. 1 healthcare applications provider by combining its vaulted database with Cerner’s EHR, imaging, practice and revenue cycle management apps, not to mention the use of the latest Cloud technologies from digital assistants to workforce health analytics to drive better patient outcome.
Nowhere is Oracle’s competitive position in cloud ERP more evident than Missouri, the home state of Cerner. For years, the state department of transportation has been running PeopleSoft applications for HCM. In 2022, Ellison said the state plans to implement Oracle Cloud ERP as its system of record, ditching its legacy CGI Advantage and eliminating other bidders including Infor, SAP and Workday. With that addition, Oracle is expected to be the ERP system of record in 24 states, compared with 11 for CGI, and eight for SAP, the top three contenders in the ERP market at the state house level, according to our Buyer Insight Master Database.
Oracle NetSuite has done exceptionally well among fast-growing companies in the United States. Among 305 fast-growing enterprises in the US recently being tracked by our Buyer Insight Master Database, 163 of them, or 53%, run Oracle ERP as their system of record. SAP is second with a 12% share. Among those 163 organizations that use Oracle, Oracle NetSuite is being used among 86 of them, winning the support of more than half of them.
Source: Apps Run The World June 2022