Oracle Returns to Sales Growth on Greater Cloud Demand

(Bloomberg) -- Oracle Corp. reported quarterly revenue that topped analysts’ estimates and projected rising sales, in a sign of greater demand for its cloud-computing services while businesses are working remotely during the coronavirus pandemic.

Fiscal first-quarter sales rose 1.6% to $9.37 billion, the Redwood City, California-based company said Thursday in a statement. Analysts, on average, estimated $9.19 billion, according to data compiled by Bloomberg. Oracle’s revenue had declined 6% year-over-year in the previous three-month period.

Chief Executive Officer Safra Catz projected revenue in the current quarter will climb 1% to 3% from a year earlier. Analysts anticipated no sales growth.

Catz and Executive Chairman Larry Ellison have tried to revamp Oracle’s business model for a new era of computing, in which software is delivered through the internet rather than shipped in boxes on discs. Thursday’s results show that Oracle’s cloud-based business applications lead the way on modernizing the business, even as demand withers for the company’s older technology.

The pair’s latest bet is to try to acquire the U.S. assets of video-sharing platform TikTok, owned by China’s Bytedance Ltd. While the two companies occupy very different parts of the technology market, the deal could give the world’s second-biggest software maker another anchor tenant for its public cloud services that rival Amazon.com Inc. and Microsoft Corp., as well as provide a huge amount of consumer data Oracle could sell to advertisers for its ad-targeting business, Oracle Data Cloud. Catz declined to comment on the company’s bid during the call.

After years of largely going it alone, Oracle has signed more partnerships with other software makers in an effort to make its cloud services more appealing and useful to corporate customers. While it has lost a bid to supply cloud services to the U.S. Defense Department, the company’s partnership with Microsoft, which is also in the running to buy TikTok, means that it could one day supply cloud software to the Pentagon. The 43-year-old software maker has also made its cloud technology work inside of customers’ own server farms, for firms that are unwilling or unable to outsource computing needs. Catz described the company’s results as “fantastic.”

“I have a high level of confidence that our revenue will accelerate as we move on past Covid-19,” she said in the statement.

Profit, excluding some expenses, will be 98 cents to $1.02 a share in the quarter that ends in November, compared with analysts’ average estimate of 94 cents. The company recorded a profit of 93 cents a share in the quarter that concluded Aug. 31, while analysts were looking for 86 cents.

Shares gained more than 3% in extended trading after the results. Earlier, the stock closed at $57.33 in New York, and has jumped 8.2% this year.

Revenue from cloud services and license support climbed 2% to $6.95 billion. That metric includes sales from hosting customers’ data in the cloud, but a large portion is generated by maintenance fees for traditional software housed on clients’ corporate servers. Oracle said that McDonald’s Corp. has brought all of its North American financial systems to reside in Oracle’s cloud.

Cloud license and on-premise license sales increased 9% to $886 million, suggesting the company is signing more new software deals. Revenue from the company’s accounting and financial-planning application for large businesses climbed 33% last quarter, while sales of NetSuite, which caters more to small- and mid-sized businesses, rose 23%.

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