Oracle Q2 financial results: Share price drops again as cloud growth can't offset on-premise software decline

Oracle reported flat revenues for Q2 2017 as its growing cloud business failed to offset a decline in its traditional on-premise software licence business. Revenue for Q2 was $9 billion, which is up just one percent year on year in constant currency, and net income was down eight percent to $2 billion for the quarter. Oracle's share price dropped two percent after hours.

This follows the giant enterprise IT vendor's Q1 results for 2017, where total revenue was up a modest two percent year on year to $8.6 billion, but still shy of expectations of between two and five percent total revenue growth. Shares subsequently dropped three percent overnight back in August.

While new software license revenue dropped 20 percent to $1.4 billion, Oracle's nascent combined software-as-a-service (SaaS) and platform-as-a-service (PaaS) cloud business revenue continued to grow, up 81 percent for the quarter to $878 million. This is up from Oracle's good growth figures for its combined cloud business in Q1, where revenues were up 77 percent to $798 million.

Its core on-premise software revenues were down four percent at $6.1 billion. Total hardware revenues also continue to fall, down 10 percent to $1 billion.

Oracle's even newer infrastructure-as-a-service (Iaas) product, which competes with the likes of AWS and Azure cloud, brought in just $175 million for the quarter, which is up six percent.

Oracle's combined cloud business still only accounts for 12 percent of total revenues as it looks to pivot away from its traditional software licence business, which accounts for 68 percent of its revenues.

Co-CEO Mark Hurd continues to assert that: "We expect to book over $2 billion in new annually recurring cloud business this year alone."

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Hurd also couldn't resist a dig at its cloud rival Salesforce, stating in the earnings press release: "Oracle has now passed and become number one in SaaS cloud applications sales to customers with over 1,000 employees according to the latest IDC report."

Fellow CEO Safra Catz also got in on the act, stating: "When crossed the billion dollar milestone their SaaS and PaaS subscription growth rate had slowed down to 36 percent, even after you include all their acquisitions."

This follows the trend of Oracle calling out cloud rivals in its earning reports instead of letting the results do the talking, with Workday a previous target.

Oracle is also currently locked in a lawsuit with a former employee who claims that her contract was terminated after she threatened to blow the whistle on Oracle's "improper accounting practices in its cloud services business", according to Reuters.

Copyright © 2016 IDG Communications, Inc.

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