News & Analysis

Oracle Q4 Revenues Rise; to Focus on Cloud Investments

The company ran up a $15 billion debt on its healthcare acquisitions with more capital likely to be plowed into the cloud services where competition is hotting up

Demand for cloud infrastructure and increase in SaaS services helped Oracle post better-than-expected Q4 revenues in 2022 with the company chalking up $11.8 billion during the March-to-May quarter. This represented a 5% year-on-year increase while the company also ran up a debt of $15.8 billion towards its acquisition of healthcare tech company Cerner

Oracle CEO Safra Catz told analysts during a post-results call that Oracle would loosen its purse strings further during the next fiscal year to meet the growing demand in cloud services amidst the growing competition for cloud-first database service providers. 


Growing demand and increasing competition

A Bloomberg report said Oracle could face some headwinds in the coming quarters from companies such as MongoDB, Databricks and Snowflake that compete with Oracle in database management. The report says moving to the cloud has challenged the systems of the past with new providers making it easier to adopt their technology directly, thus alleviating the need for corporate customers to negotiate large contracts that allow end-users to pick their own tools. 

These companies also allow easy deployment without necessarily having a large team of database administrators that is required to support Oracle’s products. This represents a clear cost saving for enterprises who would have otherwise invested in salaries for these engineers. 


Oracle may be losing its market leadership

Enterprises shifting away from Oracle may be just a drop in the $155 billion database ocean, that brands like JP Morgan Chase and Nasdaq looking elsewhere is more than a warning sign for Oracle that built its hegemony over four decades. However, given that databases are critical to modern living, it is understandable that the company plans to invest more on the cloud. 

What holds Oracle in good stead is the fact that in spite of the hype over cloud computing, large businesses still run databases via on-site centers with those that existed before 2000 possibly still using mainframes and those that are moving follow a slow approach, running Oracle systems while bringing other vendors for new projects. 

Oracle may have heard the warning bells, but the fact remains that the company will not lose its hegemony in the industry. Their database business revenues stood at $15.6 billion as per Gartner estimates, most of which comes from existing customers. However, one also needs to accept that Oracle owned 27% of the database market share in 2019 that fell to 24% in 2020. 


What’s in the offing for Oracle?

The company expects to add six additional regions during 2023 in addition to 38 cloud regions across 20 countries, the Oracle CEO said. However, instead of speaking of lost customers, chairman and CTO Larry Ellison listed those that came on board, including United Healthcare, Citibank, Chubb, PNC, SMBC, Mitsui Sumitomo etc. 

Total cloud revenues for the company stood at $2.9 billion which was a 19% increase from last year. The company said this was driven by growing demand across all cloud products around the OCI (Oracle Cloud Infrastructure), with Catz crediting Fusion and NetSuite cloud applications for this growth. Demand for cloud business grew 39% in this quarter, Catz said. 

The company expects cloud revenue growth momentum to continue next fiscal year as well, with Oracle’s acquisition of healthcare company Cerner likely to play a big role. “For Q1, total cloud excluding Cerner is expected to grow from 25% to 28% in constant currency and is expected to grow from 22% to 25% in USD [US dollars]. Total cloud growth in Q1, including Cerner, is expected to grow from 47% to 50% in constant currency, 44% to 47% in USD,” Catz said in the earnings call.



Leave a Response