10-QPeriod: Q2 FY2017

ORACLE CORP Quarterly Report for Q2 Ended Nov 30, 2016

Filed December 19, 2016For Securities:ORCLORCL-PD

Summary

Oracle Corporation's Q2 fiscal year 2017 report (ending November 30, 2016) shows steady revenue performance with slight growth, driven primarily by its Cloud and On-Premise Software business. While total revenues saw a marginal increase of 1% year-over-year, the company's strategic shift towards cloud offerings is evident, with Cloud SaaS and PaaS revenues growing significantly. This transition, however, has impacted new software license revenues, which saw a decline. The acquisition of NetSuite for $9.1 billion in July 2016 is a significant event, expected to bolster the cloud portfolio. Despite increased operational expenses related to cloud investments and acquisitions, operating margins remained healthy, supported by strong performance in software license updates and product support. The company also highlighted its robust cash flow generation and its commitment to returning capital to shareholders through dividends and share repurchases.

Financial Highlights

56 data points
Beta

Revenue

$9.04B

61.0% Gross Margin

Net Income

$2.03B

22.5% Net Margin

EPS (Diluted)

$0.48

Total Assets

$123.60B

Cash & Equivalents

$18.59B

Free Cash Flow

$329.00M

Financial Statements
Beta
Revenue$9.04B
Gross Profit$5.51B
R&D Expenses$1.51B
Operating Expenses$6.00B
Operating Income$3.04B
Interest Expense$451.00M
Net Income$2.03B
EPS (Basic)$0.50
EPS (Diluted)$0.48
Shares Outstanding (Basic)4.10B
Shares Outstanding (Diluted)4.20B

Key Highlights

  • 1Total revenues for the quarter were $9.035 billion, a slight increase of 0.5% year-over-year (1% on a constant currency basis).
  • 2Cloud revenues (SaaS, PaaS, IaaS) demonstrated strong growth, reaching $1.053 billion, up 63% year-over-year.
  • 3New software license revenues declined by 20% year-over-year to $1.347 billion, reflecting a strategic shift towards cloud subscriptions.
  • 4The company completed the acquisition of NetSuite Inc. for approximately $9.1 billion, aimed at expanding its cloud software offerings.
  • 5Operating income was $3.037 billion, an increase of 2.8% year-over-year, with operating margin slightly improving to 33.7%.
  • 6Net income was $2.032 billion, or $0.48 per diluted share, compared to $2.197 billion, or $0.51 per diluted share, in the prior year period.
  • 7Oracle generated $6.961 billion in cash flow from operating activities for the first six months of fiscal 2017, indicating strong operational cash generation.

Frequently Asked Questions

Oracle reported total revenues of $9.035 billion, a slight increase of 0.5% compared to the prior year's quarter. The primary driver of this growth was the Cloud and On-Premise Software business, specifically the significant increase in Cloud SaaS, PaaS, and IaaS revenues, which grew by 63% year-over-year to $1.053 billion. This growth is part of Oracle's strategic shift towards cloud services.

Oracle acquired NetSuite Inc. for approximately $9.1 billion on November 7, 2016. While the full financial impact will be seen in future periods, NetSuite's results were included in Oracle's consolidated financial statements from the acquisition date, contributing to the growth in cloud SaaS and PaaS revenues. The acquisition is a key part of Oracle's strategy to expand its cloud software offerings.

Oracle is experiencing a clear shift from traditional new software licenses to cloud subscriptions. New software license revenues decreased by 20% year-over-year to $1.347 billion. Conversely, cloud revenues (SaaS, PaaS, IaaS) showed robust growth, increasing by 63% to $1.053 billion. This trend indicates that customers are increasingly adopting Oracle's cloud-based solutions over on-premise software licenses.

Oracle demonstrated strong financial health and cash flow generation. For the first six months of fiscal 2017, the company generated $6.961 billion in cash flow from operating activities. As of November 30, 2016, Oracle held $18.592 billion in cash and cash equivalents and $39.614 billion in marketable securities, indicating substantial liquidity. The company also continued its share repurchase program and dividend payments, reflecting confidence in its financial position.