Oracle exits fiscal 2021 on a high as Larry Ellison goes SAP-baiting one more time

Profile picture for user slauchlan By Stuart Lauchlan June 15, 2021 Audio mode
Summary:
A strong end to the year as the applications business powers ahead.

Larry Ellison on stage at oow17

Oracle ended its full fiscal year 2021 with strong growth in Q4, comfortably beating consensus estimates, and giving CTO Larry Ellison another chance at SAP-baiting over the performance of the applications business. 

The firm turned in full year revenues of $40.48 billion, up 8% year-on-year and a record $13.75 billion profit. Fourth quarter profit was $4.03 billion on revenue of $11.23 billion, up from $3.12 billion and $10.44 billion respectively for Q4 last year. 

According to CEO Safra Catz, the fourth quarter was “really a story of every product, every region and every metric exceeding expectations”. Breaking down the Q4 numbers further: 

  • Total cloud services and license support revenue for the quarter was $7.4 billion, up 8%.
  • Application subscription revenues were $3 billion, up 11%.
  • Database subscription revenues, including database support and database cloud services, were up 8%.
  • License revenues were $2.1 billion, up 9%.
  • Infrastructure subscription revenues were $4.3 billion, up 6%.
  • Fusion ERP was up 42%. NetSuite ERP was up 22%. Fusion HCM was up 30%.

Those last numbers were picked up on by CTO Larry Ellison as he opened up his remarks with some more barbs at SAP. Following last quarter’s eye-catching pitch of reading out a long list of companies he said had defected from the arch-rival, the latest comments were more contained, but not less pungent: 


Our strategy and applications depends on Oracle becoming the world’s largest provider of cloud ERP systems. Then, building upon that strong ERP foundation, we’re going to expand into manufacturing, CRM and industry-specific applications. We are successfully executing this strategy. Oracle Fusion and NetSuite are now the world’s two most popular cloud ERP systems. 

SAP, the leader in on-premise ERP, never rewrote their ERP system for the cloud. This has caused hundreds of customers to abandon SAP and migrate to Oracle Fusion ERP. That’s already happened. But over the coming months, several more major banks and utilities and a lot of other companies will complete their Oracle Fusion implementation projects and go live on Fusion ERP. Oracle is taking massive amounts of share away from SAP ERP. It’s crucial to our future.

Ellison also stated that the firm now has more new customers for Oracle Fusion than it does upgrades from on-premise implementations, something like 60/40 he reckoned:

That’s really the trend. And we think that trend is actually going to accelerate in favor of new customers because the SAP migration phenomena is relatively recent over the last two years, but it’s really accelerating now in the last 12 months. So, we think that’s going to hold.

Another way to look at it is, as people migrate to Oracle Fusion ERP and smaller companies migrate to NetSuite ERP, these are both enormous businesses. Fusion ERP, I mean, certainly much bigger than $10 billion and NetSuite is bigger than $10 billion. Fusion is probably bigger than $20 billion as these businesses mature.

And for one last twist of the knife, he added: 

We almost never lose a competitive ERP deal in the cloud, virtually never.

My take

A solid end to the year. Wall Street pushed the stock price down on the release of numbers, seemingly disappointed by forward guidance as Catz announced plans to invest back into the business, citing the intention to “roughly double our cloud CapEx spend in FY 2020 to nearly $4 billion”. She argues that “the increased return in the cloud business more than justifies this increased investment, and our margins will expand over time”. For short term thinkers on Wall Street, that may not be what they want to hear, but for Oracle it’s a sensible move.