"Appears" is a key word here, since Oracle now only shares select details about how its business app sales are trending.
Oracle, which is up over 7% in Thursday trading after beating its May quarter estimates and issuing nearly in-line August quarter guidance, derived most of its quarterly sales beat from a $200 million beat for its "cloud license and on-premise license" segment. This segment, which owes its sales to database licenses and to a lesser extent, traditional software licenses in areas such as applications and middleware, saw revenue grow 12% annually in dollars and 15% in constant currency, to $2.52 billion.
On Oracle's earnings call, co-CEO Mark Hurd disclosed that Oracle's database license sales grew by a "mid-teens" percentage on a constant currency basis. No growth rate was shared for applications license sales, which have been pressured for some time by the adoption of subscription-based cloud/SaaS apps.
Separately, Larry Ellison's firm reported that "cloud services and license support" revenue, whose sales are derived from SaaS subscriptions, support services for databases and other licensed software (still a huge business) and to an extent, cloud developer and infrastructure services, was roughly flat at $6.8 billion. With Oracle having stopped breaking out its cloud revenue, it's hard to gauge just how much its SaaS revenue grew last quarter. But the disclosures that Oracle did provide suggest its growth may have moderated.
On the call, Hurd indicated that Oracle's "apps ecosystem" revenue, which covers SaaS subscriptions, traditional app licenses and support revenue related to app licenses, grew 6% in constant currency for the whole of fiscal 2019, which ended in May. Given that 7% annual growth had been reported for apps ecosystem revenue for Oracle's prior three quarters, this disclosure suggests apps ecosystem growth slowed to a low-to-mid single-digit clip last quarter.
The disclosure also means that Oracle failed to hit its guidance for "roughly double-digit" fiscal 2019 apps ecosystem growth, which was issued last September.
Also possibly a sign of moderating SaaS growth: Oracle's short-term (12-month) deferred revenue balance, which is heavily tied to SaaS and license support billings that haven't yet been recognized as revenue, was roughly flat annually at $8.4 billion. As a result, while Oracle's revenue rose 1% last quarter, its billings -- defined as revenue plus the sequential change in deferred revenue -- were down about 1.5%.
To be fair, Hurd did say that Oracle's total enterprise resource planning (ERP) and human capital management (HCM) SaaS revenue grew by a high-20s percentage in constant currency, and that sales of SaaS apps for industry verticals rose 19%. However, he added that sales of Oracle's "data as a service" offerings for marketers, which have been pressured by Facebook's (FB) attempts to restrict the use of offline sales data for online ad targeting, fell 15%.
And no growth rate was shared for Oracle's broader customer relationship management (CRM) SaaS business; Salesforce.com (CRM) continues taking CRM share at large enterprises, and Microsoft (MSFT) is seeing good traction for the CRM apps in its Dynamics 365 cloud business app suite, whose sales skew towards mid-sized businesses.
And needless to say, even if total SaaS growth was strong, the modest growth that Oracle reported for its total apps ecosystem revenue suggests any SaaS momentum was largely offset by revenue pressures for on-premise app license and license support revenue streams. Just as Microsoft shares revenue growth rates for its entire Office and Dynamics app businesses, rather than just for its Office 365 and Dynamics 365 suites, Oracle should be providing growth rates for its entire ERP, HCM and CRM app businesses, rather than cherry-picking good SaaS numbers.
Overall, it's still far from clear that Oracle's total app revenue, which for now is benefiting from a very robust enterprise software spending environment, will be delivering healthy long-term growth. And if it fails to do so, Oracle's top-line growth will be heavily dependent on the fortunes of its database business, which (although having just posted a pretty good quarter) has been seeing intensifying competition from cloud giants.