What happened
Shares of database giant Oracle (ORCL -0.30%) have soared 31.7% since the beginning of the year, according to data provided by S&P Global Market Intelligence. The gain was driven by two solid quarterly reports featuring revenue, earnings, and cloud growth. Oracle announced its second-generation cloud infrastructure offering late last year in an effort to compete directly against Amazon Web Services (AWS).
So what
Oracle's fiscal third-quarter report in March led to a jump in the stock price, and its fourth-quarter report provided an encore. Total revenue grew by 2% year over year during the third quarter, and by 3% during the fourth quarter. Software-license and hardware sales declined in both cases, but that weakness was more than offset by strong cloud growth.
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During the third quarter, cloud software-as-a-service and platform-as-a-service revenue reached $1 billion, up 73% year over year. Cloud infrastructure as a service (IaaS) produced $178 million, up just 17% year over year. That latter category accelerated during the fourth quarter, growing by 40% year over year to $397 million, providing some evidence that Oracle's cloud-infrastructure push is working.
Earnings also increased in each quarter. Non-GAAP EPS jumped 7% year over year during the third quarter and 10% during the fourth quarter, a sign that Oracle's investments in cloud computing aren't hurting the bottom line.
Now what
Oracle is the dominant provider of database software, and its cloud-infrastructure push appears to be mostly an effort to ensure that existing on-premises database customers have a viable path to the cloud that doesn't involve getting the service elsewhere. Typically, the first step to dropping Oracle's software is moving it to AWS.
Investors clearly approve of Oracle's cloud push, sending the stock up more than 30% this year despite middling total revenue growth. Whether Oracle will ever be a major player in the IaaS market remains to be seen. But it should be able to succeed in convincing its database customers to choose its cloud over the competition.
