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Oracle says its cloud investment paid off in Q2 financial results

Oracle beat its quarterly financial targets for the first time in four quarters, thanks largely to a rise in cloud revenue. It's a sign that the company's investments in cloud technologies may be starting to pay off.

After days of dire predictions about Oracle's second-quarter earnings report, things ended up looking rosy for the vendor when it announced the results for the fiscal quarter, which ended Nov. 30, last week. Oracle finally beat its revenue target after falling short of projections the past three quarters. And in keeping with its newfound focus on cloud computing, the company gave most of the credit to the cloud.

Total Q2 revenue increased 3% year-over-year to $9.6 billion. Software and cloud revenue rose 5% to $7.3 billion; as part of that, combined revenue from Oracle's cloud software, platform and infrastructure as a service (IaaS) businesses was up 45% from the same period last year, reaching $516 million. During a conference call discussing the results, Larry Ellison, Oracle's chairman and CTO, said the company booked more than $170 million in annual subscriptions for its SaaS and PaaS offerings in the second quarter. He added that Oracle expects new bookings to top the $250 million mark by the fourth quarter of fiscal 2015, and that it will sell "well over $1 billion" worth of cloud subscriptions in the following year.

Last quarter, Ellison said the lower-than-expected revenue was due to the company shifting gears to a more cloud-oriented business. Now Oracle's cloud investments seem to be paying off. For example, it announced a new cloud database platform at the Oracle OpenWorld 2014 conference in late September. That attracted about 150 customers in Q2, according to co-CEO Mark Hurd. And Ellison added on the earnings call that Oracle sees much more potential in the PaaS offering than in its previously introduced IaaS technology. "That's where our huge differentiation is," he said, pointing to Oracle's automation of database management processes.

Over the past year, Oracle has also been steadily acquiring cloud companies. It bought BlueKai, a cloud marketing platform developer, in February. In June, it acquired cloud-based customer service software vendor LiveLOOK to expand its Oracle Service Cloud platform. And it bought TOA Technologies in July to get field service SaaS software to use with the Oracle Service Cloud and Oracle ERP Cloud.

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However, the surge in cloud acquisitions goes back farther, with Oracle also buying numerous cloud companies in 2012 and 2013. That included Collective Intellect, Eloqua, SelectMinds, Taleo and Vitrue two years ago; last year, Oracle acquired BigMachines and Compendium. Those companies all provided Oracle with cloud applications, helping to boost its portfolio of cloud apps, which now includes more than 600 products.

Last quarter's report coincided with Ellison stepping down from the role of CEO to focus on technology development, with Hurd and Safra Catz taking his place as co-CEOs. The second quarter was their first as Oracle's top execs, and the results make them look good. But the long process of building up Oracle's cloud offerings makes the Q2 win about more than just the work of one quarter or a change of CEOs.

Jessica Sirkin is associate site editor of SearchOracle. Email her at and follow us on Twitter: @SearchOracle.

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