- Oracle’s cloud strategy seems to be gaining traction, but the coronavirus crisis could turn into a major hurdle for the tech giant, a Wall Street analyst said Friday.
- Oracle posted better-than-expected results on Thursday and said the company has not seen any major impact from the crisis.
- “We think the firm is now closer to the long-awaited inflection point, although we wonder to what extent the COVID-19-related issues could push this out a few quarters,” William Blair analyst Jason Ader told analysts in a note.
- Click here for more BI Prime stories.
Oracle’s cloud offensive seems to be gaining traction, but the coronavirus crisis could cause it to lose steam, a Wall Street analyst said Friday.
“We think the firm is now closer to the long-awaited inflection point, where Oracle’s high growth offerings start to more than offset its shrinking legacy product portfolio, although we wonder to what extent the COVID-19-related issues could push this out a few quarters,” William Blair analyst Jason Ader said in a research note.
Oracle reported better-than-expected results on Thursday, highlighted by gains in applications subscription revenue.
That’s good news for the tech giant, which is pivoting away from a license-based business model as it pushes for a stronger position in the cloud.
Oracle emerged as an enterprise tech powerhouse in the market for software used by businesses to run private data centers. That business has been disrupted by the cloud, which lets companies set up networks in web-based platforms, allowing them to scale down or even abandon private data centers.
Oracle is struggling to compete with the dominant cloud players led by Amazon, Microsoft and Google, although it has a solid position in the market for cloud applications.
Thursday’s report showed that the strategy is starting to pay off, Ader said.
“After multiple quarters of near 0% revenue growth or modest revenue declines, Oracle finally saw a top-line acceleration that had been promised for multiple quarters,” he wrote.
But the coronavirus crisis which has caused severe disruptions in the broader tech industry could cause the Oracle offensive to lose momentum, he said. On Thursday, CEO Safra Catz said the company was not seeing any significant impact, saying, “We’re largely conducting business as usual.”
Ader noted Oracle founder Larry Ellison’s statement “that Oracle is a very different business than it was just several years ago, with one-time license sales having shifted toward recurring subscriptions making Oracle’s business much more resilient in these trying times.”
But he also stressed the importance of Oracle’s cloud strategy having an impact on the tech giant’s other businesses.
“We continue to worry that Oracle is falling further behind in the cloud and IaaS (infrastructure as a service) specifically, which is likely to have long-term negative ramifications for a number of Oracle’s other businesses, especially databases and middleware,” he wrote.
Got a tip about Oracle or another tech company? Contact this reporter via email at email@example.com, message him on Twitter @benpimentel or send him a secure message through Signal at (510) 731-8429. You can also contact Business Insider securely via SecureDrop.