Software vendor financials analysis - April-June 2023

IBM

Software vendor financials analysis - April-June 2023

13 June 2023

6 minute read

This quarter we give you our software vendor financials analysis for Q2 2023. This time we look at the financial results from IBM, Microsoft, Oracle, SAP and Google Cloud.

Software vendor financials analysis Q2 2023

IBM Q1

The first results of FY 23 for IBM aren’t particularly great. Yes, there are increases in most key areas but they’re small – just 0.4% increase to $14.3 billion in overall revenue. It’s true that currency fluctuations have had an impact, with IBM stating that “constant currency” would have seen a 4.4% revenue increase. While that’s better, it’s still not a huge rise in revenue. The “Software” category saw revenues increase 2.6% to $5.9 billion while the Red Hat segment within that grew 8%.

“Consulting” revenues rose almost 3% while the “Infrastructure” division dropped 3.7% to $3.1 billion.

Results here – https://www.ibm.com/investor/financials

Microsoft Q3

Another quarter of increases across the board, just not as large as perhaps expected.

Revenue was up 7% to $52.9 billion while Net Income increased 9% to $18.3 billion. There was double digit growth for Office 365 Commercial (14%), Dynamics 365 (25%), and Azure (27%) – with LinkedIn growing 8% too.

The Azure number continues the trend of decreasing levels of growth each quarter – partly a consequence of an ever increasing base, the still higher than usual energy costs, and – I would think – customer organizations looks to reduce/pause/spread cloud spend in some areas due to economic uncertainty.

Product growth in some of the newer focus areas is strong i.e.:

Azure Arc is up to 15,000+ customers which is 150% up year on year (YoY)
Power Platform is up to 33 million Monthly Active Users (MAU) – almost 50% up YoY
Almost 60% of Enterprise customers are buying Teams Phone, Teams Rooms, and/or Teams Premium

Satya Nadella confirmed that the upcoming swathe of AI Copilot releases will be monetized so expect to see those driving revenue through FY24 next year.

Results here – FY23 Q3 – Press Releases – Investor Relations – Microsoft

Oracle Q3

Oracle saw quarterly revenue increase 18% to $12.4 billion which can be broken down into:

Q3 Cloud Revenue (IaaS plus SaaS) $4.1 billion, up 45%
Q3 Cloud Infrastructure (IaaS) Revenue $1.2 billion, up 55%
Q3 Cloud Application (SaaS) Revenue $2.9 billion, up 42%
Q3 Fusion Cloud ERP (SaaS) Revenue $0.7 billion, up 25%
Q3 NetSuite Cloud ERP (SaaS) Revenue $0.7 billion, up 23%

Showing significant % growth in the IaaS & SaaS areas, albeit from a relatively low base.

“Cloud services and license support” revenues were up 17% to $8.9 billion while “Cloud license and on-premise[s] license” revenues were unchanged at $1.3 billion.

Results here – Oracle Announces Fiscal 2023 Third Quarter Financial Results

SAP Q1 2023

Total revenue for SAP in the first quarter of their new financial year was €7.4 billion with “cloud and software” comprising €6.4 billion of that. Cloud revenue increased 24% to €3.2 billion while S/4HANA increased by an impressive 77%…although the latter “only” equates to €716 million.

Software licenses revenue decreased by 13% to €276 million, continuing the pivot to the cloud that SAP, and pretty much all software publishers, are on.

In March, SAP sold their share of Qualtrics for $7.7 billion and also announced an expanded partnership with Red Hat “to significantly increase SAP’s use of and support for Red Hat Enterprise Linux”.

Results here – SAP Quarterly Statement Q1 2023

Google Cloud Q1 – profitable at last!

The big news here is that Google Cloud is finally profitable! Sales of $7.4 billion saw a profit of $191 million. While that’s only 2.5%, it is the first time in 15 years that this part of Google has been in the black – it has lost over $14 billion in just the last few years alone. Whether they can sustain this move to profitability is the next question but, for customers of Google Cloud, this perhaps offers a little more certainty around the future of this product area. It perhaps also means that Oracle will have to fight even harder to grab that #3 cloud hyperscaler spot.

Sundar Pichai, Alphabet CEO, mentioned that Google are seeing slower growth in cloud consumption as customer organizations focus on cost optimization in the cloud. This echoes what we heard from Microsoft’s Satya Nadella last quarter that spend is slowing as customers pay closer attention to their environments.

Results here – https://abc.xyz/investor/

Software vendor financials analysis - April-June 2023