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Oracle announced cloud revenue growth of 25 per cent, which came at the cost of traditional software license revenues

Oracle announced cloud revenue growth of 25 per cent, which came at the cost of traditional software license revenues

Oracle boasted a 25 per cent increase in cloud revenue in its latest earnings report as it looks to continue its transformation to offering a predominately cloud-focused portfolio of services. But the company reported minimal revenue increases, 3 per cent, a decline in traditional software license revenues, and missed analysts’ profits and sales estimates.

Oracle reported fiscal Q4 2014 total revenues were up 3 per cent to $11.bn, and software and cloud revenue increases of 4 per cent to $8.9bn. GAAP software-as-a-service and platform-as-a-service revenues were up 25 per cent to $322m, from $257m the year before.

“Our cloud subscription business is now approaching a run rate of $2bn a year,” said Oracle president and CFO Safra Catz.

“As our business has transitioned, more software revenues are being recognized over the life of a subscription rather than upfront. We’re making this transition to cloud subscriptions and ratable revenue recognition while continuously increasing our top-line revenue and our bottom-line profits year-after-year.”

Oracle CEO Larry Ellison boasted that the company is now the second largest SaaS company in the world.

“In SaaS, we’re in front of everybody but salesforce.com. In IaaS we’re larger and more profitable than Rackspace. We have by far the most complete portfolio of modern SaaS and PaaS products in the industry,” he said. “All these SaaS products run on the world’s most powerful PaaS: the Oracle in-memory multitenant database and Java.”

In a call with analysts Thursday evening Ellison added that Oracle was outdoing its cloud-native rival Workday in the HCM segment, and that the company added 870 cloud customers in Q4 including in HCM nearly 320 customers, with Fusion HCM, ERP and sales force automation revenue all growing triple-digits.

But the company also missed analysts’ estimates on sales and profits. Analysts were expecting $11.5bn but the company reported $11.3bn in sales. And according to the firm the addition of new cloud users took a 1 per cent chunk out of traditional software licenses for the quarter.

Ellison said it takes three years to get the same amount of money from a subscription as it would get from a new license sale.

“As we make the transition to selling more cloud software services as opposed to upfront licenses, we will recognize the cloud revenue over time. And that cloud revenue eventually will grow to be even bigger than our license revenue, at least that’s our plan and we will make more money doing that over time,” he said.

“So we are going to recognize the revenue more slowly. And that will somewhat affect the top line during the transition.”

While much of the company’s cloud growth as come from acquiring rival cloud firms the company is gearing up for the release of its 12c database announced last year, around the time it struck several high-profile technology partnerships with Microsoft, Netsuite and Salesforce. It’s also planning to launch the full range of its platform-as-a-service offerings this fall, which it said would also give revenues a much needed boost.

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