Oracle's Profit Solid, but Slow Cloud Sales Hamper Revenue

If there is a nagging issue for the company, it's a slowdown in software sales as newer-gen companies cut into its installed base.

Oracle always shows a profit, but it nonetheless has missed Wall Street earnings estimates in half of its past eight quarters, which can have a major impact on the stock price.

However, this wasn't a problem in the IT giant's Q1 2015 report, made public Sept. 16. Oracle beat profit expectations, but final results also showed overall revenue didn't quite meet expectations. The Redwood City, Calif.-based IT giant reported net income of $1.75 billion, or 40 cents a share, on sales of $8.45 billion.

That's still a lot of money, no matter how one looks at it.

If there is a nagging issue for the company, it's a slowdown in cloud software sales as newer-gen companies continue to cut into the older company's on-premises installed base.

Oracle, trailing Salesforce and battling other providers, such as Workday, SAP, IBM, Amazon and Hewlett-Packard, reported total cloud revenues of $611 million; Bloomberg analysts expected $630 million.

The company's cloud business accounted for 7 percent of Oracle's total sales after amounting to 5 percent in the same quarter a year ago.

Oracle is among a number of legacy IT companies making the transition to cloud computing after selling on-premises, server-based databases and middleware for 30 years. While this move to the cloud has provided the company with opportunities to move into new markets, it has hurt its traditional business of selling conventional software licenses for data centers.

"If licenses (sales) are going down and people are feeling that it's not being made up for by billings on the cloud side, they'll view that as maybe Oracle is growing in the cloud but other cloud providers are growing at Oracle's license expense," Kevin Buttigieg, an analyst at MKM Partners, told Bloomberg News.

The Oracle common stock price closed at $38.27 but slid 1.23 percent in after-hours trading to $37.80.

Chris Preimesberger

Chris J. Preimesberger

Chris J. Preimesberger is Editor-in-Chief of eWEEK and responsible for all the publication's coverage. In his 13 years and more than 4,000 articles at eWEEK, he has distinguished himself in reporting...