Database giant Oracle (NYSE:ORCL) reported its fiscal fourth-quarter numbers on Tuesday. At least, it reported some of them. The company, which has been talking up its cloud computing business over the past few years, stopped reporting cloud-related revenue separately. Instead, two new reporting segments seem almost tailor-made to make it difficult to tell how the cloud business is really doing.
"You can do the math"
Oracle used to split its total cloud revenue into two parts. Cloud software-as-a-service was the biggest contributor, accounting for nearly three-quarters of Oracle's total cloud revenue during the first nine months of fiscal 2018. Cloud platform-as-a-service and infrastructure-as-a-service accounted for the rest. Cloud revenue represented about 16% of Oracle's total revenue.
Oracle has talked a big game when it comes to cloud infrastructure. When the company announced its Generation 2 cloud infrastructure back in 2016, executive chairman Larry Ellison said: "Amazon's lead is over. Amazon's going to have serious competition going forward."
It's not hard to see why it's important for investors to have an idea of how the cloud infrastructure business is doing. Oracle now seems to disagree. The company's new reporting scheme includes two segments with cloud-related businesses: cloud services and license support, and cloud license and on-premise license. The first grew by 8% in the fourth quarter, and the second declined by 5%.
Both segments include businesses related to on-premise software, which makes it impossible to determine how the different cloud businesses are doing. Oracle co-CEO Safra Catz did disclose in the conference call that total cloud revenue was $1.7 billion in the quarter, but it's not clear whether the company will continue to report that number.
Oracle did provide some rationale for this change. Catz said that because some large database contracts are split between the cloud and on-premise, and because some customers are in the process of moving existing database licenses to the cloud, the old reporting structure didn't give an accurate picture.
That may be the case, but the new reporting structure just replaces one problem with another.
When asked by an analyst about this change, Satz replied: "So first of all, there is no hiding. I told you the cloud number: 1.7 billion. You can do the math." Unfortunately, there's no math to do, because that's the only cloud number given. There's no way to back out how the IaaS and PaaS portion of the cloud business is doing based on Oracle's numbers.
Cloud growth could be slowing down
When Oracle reported its third-quarter results in March, the company predicted a slowdown in its cloud revenue growth. Oracle called for total cloud revenue to grow by 19% to 23% year over year in the fourth quarter, despite its cloud business being much smaller than the market leaders. Total cloud revenue grew by 42% year over year in the first nine months of fiscal 2018.
Oracle stock tumbled after that weak guidance, so it's not too surprising that the company would want to shuffle the numbers around to avoid reporting weak cloud sales. But it turns out the market doesn't take kindly to having things taken away -- Oracle stock slumped more than 7% the day after the fourth-quarter report, despite beating analyst estimates across the board.
With this reporting change, it's now much harder to gauge the success of Oracle's transition to the cloud.