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Oracle's cloud transition helps Q3 profit

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Oracle is benefitting from its transition to cloud-based products.
Oracle is benefitting from its transition to cloud-based products.

Oracle reported better-than-expected quarterly profit and adjusted revenue as the business software maker benefits from its transition to cloud-based products.

Oracle's shares rose 5.2% to $45.30 in extended trading on Wednesday.

Sales of the company's cloud computing software and platform service rose nearly 62% to $1.19 billion, while its software licensing business fell nearly 16%.

"The worst of this cloud transition is over [for Oracle]," Drexel Hamilton analyst Brian White wrote in a note.

The company's shift to cloud-based products to tackle the shrinking licensing business was strengthened with its $9.3 billion NetSuite acquisition in July. The deal helped the company to take on nimbler rivals such as Workday and Salesforce.

"The growth in revenue from our cloud business has overtaken new software licence declines on an annual basis," Safra Catz, Oracle CEO, said during the earnings call yesterday.

The California-based company said adjusted revenue from its software-as-a-service and platform-as-a-service unit rose 86% to $1.1 billion on a constant currency basis, which was at the high end of its previous guidance.

"I would have thought it would be even higher, but investors should be ok given that it was in the high-end of their guidance," Wedbush Securities analyst Steve Koenig said.

Oracle's net income rose to $2.24 billion, or 53 cents per share, in the third quarter ended 28 February, from $2.14 billion, or 50 cents per share, a year earlier.

Excluding items, the company earned 69 cents per share beating the average analysts' estimate of 62 cents per share, according to Thomson Reuters.

The company's provision for income taxes in the latest quarter fell 22% to $459 million.

Oracle's total adjusted revenue rose nearly 3% to $9.27 billion, marginally beating estimates.

The company forecast current-quarter earnings of 78 cents to 82 cents per share and revenue to grow between negative 1% and positive 2%.

Analysts are expecting fourth-quarter profit of 78 cents and revenue of $10.62 billion.

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