Oracle to boost cloud investments after a strong quarter

The demand for cloud infrastructure combined with the rise in sales of software-as-a-service (SaaS) services boosted Oracle’s fourth quarter revenue for fiscal year 2022, but the acquisition of healthcare tech company Cerner has chalked up a debt of US$15.8 billion.

During a call with analysts after the results were announced on Monday, Oracle CEO Safra Catz said that she expected capital expenditure to grow during the next fiscal year to meet the demand in cloud services.

“We expect to add another six regions in fiscal 2023 in addition to the 38 cloud regions across 20 countries that we have already serving our customers,” Catz said, according to a transcript from Seeking Alpha.

Highlighting the growth among large accounts, Oracle Chairman and CTO Larry Ellison pointed to a long roster of high-profile customers the company signed up during the quarter, which included United Healthcare, New South Wales Ministry of Health, Citibank, Chubb, PNC, SMBC, Overseas China Banking Corporation, Mizuho, Mitsui Sumitomo, financial services firm GMP, and Abercrombie Fitch among others.

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Riding on the tailwinds of its previous quarter, Oracle reported total revenue of $11.8 billion — including the effect of currency fluctuations, that was up by five per cent year-on-year.

Total cloud revenue (IaaS plus SaaS) for the company stood at $2.9 billion, up 19 per cent from the year-ago period, driven by the demand across all cloud products, especially Oracle Cloud Infrastructure (OCI).

“These consistent increases in our quarterly revenue growth rate typically have been driven by our market leading Fusion and NetSuite cloud applications," Catz said. "But this Q4, we also experienced a major increase in demand in our infrastructure cloud business — which grew 39 per cent in constant currency."

Catz pointed out that a part of the growth momentum came from existing Oracle customers expanding their footprint.

“Fusion customers are buying Oracle Cloud Infrastructure (OCI). OCI customers are buying Fusion and NetSuite," Catz said, adding that she expects this phenomenon to drive incremental growth in the upcoming quarters. "Database customers are moving to autonomous on OCI. Industry vertical customers are going all in on Fusion. We have real momentum all around."

Cloud sales growth expected to continue

Despite the unstable macro environment, Catz expects the company to continue its cloud revenue momentum into the next fiscal year buoyed by its acquisition of Cerner, and Oracle’s investment in new cloud regions.

“For Q1, total cloud excluding Cerner is expected to grow from 25 per cent to 28 per cent in constant currency and is expected to grow from 22 per cent to 25 per cent in USD," she added. "Total cloud growth in Q1, including Cerner is expected to grow from 47 per cent to 50 per cent in constant currency, 44 per cent to 47 per cent in USD."

Catz further said that the company was reviewing the entire product portfolio to identify areas where it can include Oracle technology rather than third-party products, as well as moving them to OCI.

In the financial services sector, the company is working with major banks and leading logistics companies to automate B2B commerce from directly within the Oracle ERP Cloud, Ellison said in the earnings call.

In addition, Ellison said that the company will focus on healthcare and the financial services sector to increase cloud revenue.

“In healthcare, we’re in the process of building a complete suite of applications for the entire healthcare ecosystem, starting with healthcare providers like hospitals and clinics,” Ellison added.

Cerner forecast to be a major business for Oracle

When asked about how the Cerner acquisition plays into the chairman’s project of creating a national health records database, Ellison said that it could become Oracle’s largest business to date as it solves two critical problems.

“Well, the national health records database solves two problems, and it allows patients in the case of an emergency to have their caregivers get immediate access to all of their health records, which will deliver way better outcomes for people,” Ellison said. "The other is public health officials will get much better information about the state of health in their country."

Oracle’s acquisition of Cerner for $28.3 billion, announced on December 20, is expected to play a pivotal role in shaping the company’s healthcare suite.

“We’re modernising Cerner’s clinical systems by adding capabilities like a voice user interface and applications like disease-specific AI models for cancer and other diseases. We’re including an IoT device network to improve patient diagnostics and monitoring,” Ellison said, hinting that the same could be used throughout he healthcare suite.

The other proposed additions to the healthcare suite includes adding inventory management systems, administrative systems including applications for management of complex contract workforce, recruiting, scheduling and payment options.

Ellison also indicated that Oracle would be adding other integrations such as connecting the clinical trial system directly into the hospital clinical system to help pharmaceutical companies along with automating payment and billing systems to aid insurance companies and government organisations.