This week, enterprise Cloud infrastructure and application technology provider Oracle reported a rather positive fiscal Q4 and full year financial performance for the period ending in May which exceeded Wall Street analyst’s expectations.

Among the financial performance highlights for the recent quarter was:

  • Total quarterly revenues of $11.2 billion, up 8 percent year-over-year.
  • Cloud services and license support revenues of $7.4 billion, up 8 percent.
  • Cloud license and on-premise revenues of $2.1 billion, up 9 percent.
  • GAAP operating income of $4.5 billion and operating margin of 40 percent.
  • GAAP net income of $4 billion, up 29 percent.
  • Operating cash flow during the trailing 12 months reflecting a new record of $15.9 billion, up 21 percent.

Financial performance for the total fiscal year included:

  • Total revenue of $40.5 billion, up 4 percent year-over-year, the highest in company history.
  • Cloud services and license support revenues of $28.7 billion, up 5 percent.
  • Cloud license and on-premise revenues of $5.4 billion, up 5 percent.
  • GAAP operating income of $15.2 billion, up 9 percent, with operating margin of 38 percent.
  • GAAP net income of $13.7 billion, up 36 percent.

In executive commentary, CEO Safra Catz indicated to analysts and investors that the company had a fantastic quarter, and that the recent quarter’s performance  reflected every region and every metric exceeding expectations. Growth was described as totally organic and across a broad portfolio. Credit was extended to the company’s employees who continued to deliver services without interruption.

Sharing added color, Catz noted that Oracle’s strategic back-office applications are now experiencing an annualized growth rate of 32 percent and an annualized revenue rate of $4.4 billion. Growth for Oracle Fusion ERP was reported up 42 percent, NetSuite ERP was up 22 percent and Fusion HCM grew 30 percent. Specifically, Catz indicated: “Our back-office cloud application revenue is not only bigger than our nearest competitor, but also growing more than twice as fast.” Ms. Catz further pointed to full year operating margin of 47 percent as being the best result in seven years, and up from 44 percent in the prior fiscal year.

Looking forward, Catz indicted that she anticipates the company’s revenue growth continuing to accelerate with fiscal 2022 growing faster, with constant currency growth somewhere in the mid-single digits. FY22 first quarter total revenues are expected to grow between 3 percent to 5 percent. Further noted was a decision by the company to boost existing investment in global Cloud infrastructure footprint to further accelerate top-line revenue growth. Consequently, the company will double its CapEx spend to nearly $4 billion in FY 2022.

In his commentary, Oracle Founder and CTO Larry Ellison added that the company’s strategy and applications depend on Oracle becoming the globe’s largest provider of Cloud ERP systems, and into other adjacent application areas such as manufacturing support and industry-specific applications.

Doubling down on his commentary from prior briefings, Ellison again reiterated that: “Oracle is taking massive amounts of share away from SAP ERP. It’s crucial to our future.” He further noted to analyst’s that Oracle’s combined ERP offerings could eventually become a $30 billion business with Fusion ERP growing to a $20 billion business and Oracle NetSuite ERP, targeted for mid-market and growing companies, eventually becoming a $10 billion business.

Asked about added color on the drivers of success for the Cloud ERP area, Ellison indicated that there are more new customers than upgrades from the on-premise ERP version that he estimated as a 60-40 split. He anticipate that this trend will accelerate in favor of new customers because of the: “SAP migration phenomena”.

 

Recent Quarter Customer Highlights

Oracle continues to share specifics relative to customer adoption during each quarter’s performance.

One customer that may be of interest to our readers is UPS, the globe’s largest package delivery company. According to added detail provided by Oracle, multiple divisions of UPS run on Oracle Cloud Applications and the company’s corporate team has chosen Oracle Fusion Cloud ERP to replace an existing Oracle E-Business Suite backbone.

One of the largest US retailers of used vehicles, CarMAX is replacing a highly customized Oracle PeopleSoft application with Oracle Fusion Cloud ERP, EPM, and SCM, giving them a single cloud-based platform across financials, order management, and inventory. CarMax expects the system to deliver cost savings and integrate with other applications they use including Workday and Coupa.

Western Digital, known globally for data-centric solutions under the Western Digital, G-Technology, SanDisk, and WD brands, has been migrating to Oracle Fusion Cloud ERP and SCM over the past few years and is live with multiple modules.

Oscar- and Emmy-winning company Avid Technology develops software and hardware tools used by artists—from solo acts to creators at the largest media and entertainment companies—for video and audio editing, music notation, media storage, and other purposes. With subscriptions now surpassing 20 percent of total revenue, Avid needed better software to manage its complex billing, revenue management, and financial reporting. Avid chose Oracle NetSuite’s integrated suite of Cloud applications to replace a legacy SAP platform.

As a final comment, we were disappointed at the lack of specific mention at the senior executive level of added customer momentum specifically in the supply chain management, procurement and logistics support area. Our sources within the company have been indicating a discernable uptick in momentum. We anticipate that such detail will be forthcoming in added Oracle customer events specifically focused in the Cloud applications area that are anticipated over the coming weeks, and we will be sharing such color.

 

© Copyright 2021, The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.