Oracle Corp. co-founder and executive chairman Larry Ellison predicted three months ago the company's cloud-infrastructure business would "soon" grow faster than its other web-based, on-demand applications and services.
He didn't say then when soon would be. But it wasn't three months.
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On Wednesday, Oracle reported fourth-quarter results that topped analysts' expectations, sending its stock soaring in after-market trading. The company also changed the way it reports its cloud-computing business.
Oracle is mixing its nascent infrastructure-as-a-service business, where it provides computing resources and storage on demand, with its more tenured business of selling access to app-management and data analytics tools, called platform-as-a-service.
In its fiscal fourth quarter, Oracle posted solid results in its cloud-infrastructure business, where it competes against leaders Amazon.com Inc., Microsoft Corp. and Alphabet Inc.'s Google. Revenue from the business rose 23% to $208 million.
The Redwood City, Calif., company's platform-as-a-service business, combined with its other cloud business that sells access to applications -- known as software-as-a-service -- saw revenue climb 67% to $1.15 billion for the quarter ended May 31.
Going forward, it isn't clear whether Oracle will continue to break out its progress in the cloud-infrastructure market. On a call with analysts, co-Chief Executive Safra Catz said Oracle combined its platform and infrastructure cloud businesses because "synergies and cross-selling between these two businesses is very high."
Over all, Oracle earned a profit of $3.23 billion, or 76 a share, in its fiscal fourth quarter, up from $2.81 billion, or 66 cents a share, a year earlier. The company said adjusted per-share earnings, which commonly exclude stock-based compensation and other items, were 89 cents.
Revenue rose 2.8% to $10.89 billion. Excluding the impact of a strong U.S. dollar, revenue would have grown 4%, the company said.
According to estimates gathered by S&P Global Market Intelligence, analysts expected Oracle to earn 78 cents a share on an adjusted basis, on revenue of $10.45 billion. Shares jumped 9.5% to $50.18 in recent after-hours trading.
Mr. Ellison has made building the cloud-infrastructure business one of Oracle's key missions, saying last summer "Amazon's lead is over" after introducing Oracle's latest technology for the market.
Amazon, though, continues to pull away. Its Amazon Web Services unit, whose net sales are largely comprised of its cloud-infrastructure business, grew 43% in the most recent quarter to $3.66 billion.
To keep pace with rivals in the cloud-infrastructure market, Oracle will need to meaningfully expand its capital spending and operating expenses, Stifel Nicolaus & Co. analyst Brad Reback recently wrote in a report.
Last year alone, Amazon, Microsoft and Google spent a combined $31.54 billion in 2016 on capital expenditures and leases, much of that on data centers to deliver cloud-infrastructure services.
Oracle spent $2.02 billion on capital expenditures, up from $1.19 billion a year earlier. That, in part, led to operating margins of 34%, compared with 43% in the previous fiscal year. The company has said it doesn't believe it needs to spend as much as rivals to catch up, arguing its technology is superior.
Mr. Reback, though, believes that the company will invest more in data centers to compete in the cloud-infrastructure market.
"They will need to continue to spend $2 billion or higher a year," Mr. Reback said in an interview.
Growth in Oracle's entire cloud business is outpacing the decline in its legacy business of selling licenses to software customers run on their own servers. The cloud business grew $502 million year-over-year while Oracle's new software-license revenue fell $140 million. It is the fourth-consecutive quarter in which Oracle's cloud-revenue gains outpaced declines in its legacy software business.
Over all, revenue from new software licenses fell 5% to $2.63 billion.
The biggest piece of Oracle's software business remains its massive software-license updates and product-support operations. That segment generated $4.9 billion in revenue, a 2% gain from a year earlier.
Write to Jay Greene at Jay.Greene@wsj.com
(END) Dow Jones Newswires
June 21, 2017 17:45 ET (21:45 GMT)