Oracle attributes cloud sales for revenue increase as software licence sales continue to decline

Cloud revenues of $1.19bn enough to cover software licence sales down by 15 per cent

Oracle has attributed a bigger than expected increase in revenues and profits in its fiscal third quarter on a sharp increase in demand for cloud-computing services.

In an earnings call last night, Co-CEO Safra Catz claimed that "the increase in revenue from our cloud business has overtaken new software licence business decline on an annual basis" in the companies fiscal 2017 third quarter.

Sales of the company's cloud software and platform service rose to $1.19bn, according to the company's latest quarterly results, while its software licensing business fell by nearly 16 per cent to $1.4bn.

However, with a new version of Oracle's database on the way, investors will be hopeful that the software licensing section of revenues doesn't continue to fall as rapidly in the quarters to come.

The quarter's revenues were $9.2bn, with an operating income of $3bn and a net income of $2.24bn.

The biggest increase was in cloud-related revenues which are up to $1.1bn, with software-as-a-service (SaaS) and platform-as-a-service (PaaS) revenues rising 73 per cent from the previous quarter and 86 per cent from the third quarter last year. Infrastructure-as-a-service (IaaS) revenue rose by 19 per cent to $178m.

"The third quarter gross margin for SaaS and PaaS was 65 per cent, up from 51 per cent last year, and I expect it to be about the same region in fourth quarter," said Catz.

"I expect that our total SaaS and PaaS gross margin will continue to trend towards 80 per cent over time," she added.

Total cloud revenues are now 13 per cent of the company's total sales, a five percentage point increase from this time last year.

The company's $9.3bn acquisition of NetSuite in July no doubt played a part in strengthening its shift to cloud revenues. But on-premise revenues still make up 67 per cent of total revenues, down from 70 per cent in the year-ago period.