Welcome to Oracle's Second Quarter 2017 Earnings Conference Call. Now I'd like to turn today's call over to Ken Bond, Senior Vice President. Please go ahead, sir.
Thank you, Holly. Good afternoon, everyone, and welcome to Oracle's Q2 fiscal year 2017 earnings conference call. A copy of the press release and financial tables, which include a GAAP to non GAAP reconciliation and other supplemental financial information, can be viewed and downloaded from our Investor Relations website. On the call today are Chairman and Chief Technology Officer, Larry Ellison and CEOs, Safra Cat and Mark Hurd. As a reminder, today's discussion will include forward looking statements, including predictions, expectations, estimates or other information that might be considered forward looking.
Throughout today's discussion, we will present some important factors relating to our business, which may potentially affect these forward looking statements. And these forward looking statements are also subject to risks and uncertainties that may cause actual results to differ materially from statements being made today. As a result, we caution you against Blayne's undue reliance on these forward looking statements, and we encourage you to review our most recent reports, including our 10 ks and 10 Q and any applicable amendments for a complete discussion of these factors and other risks that may affect our future results or the market price of our stock. And finally, we are not obligating ourselves to revise our results or publicly release any provisions
to disclose statements in light of
new information or future events. Before taking questions, we'll begin with a few prepared remarks. And with that, I'd like to turn
the call over to Zafar.
Thanks, Ken. Good afternoon, everyone. I'm going to focus on our non GAAP results for the quarter. I'll then review guidance for Q3 as well as give some direction on FY 'seventeen and turn the call over to Larry and Mark for their comments. Clearly, we are pleased with our results as both total revenue and earnings per share exceeded the midpoint of my guidance.
Our pivot to the cloud has been phenomenal. We continue to see accelerating growth rates in our cloud business, while our key competitors are slowing down. But more importantly, the increase in revenue from our Cloud business is starting to overtake our new software license business decline. Our Cloud revenue will be larger than our new software license revenue next fiscal year when the transition will be largely complete. While the investments we've made to transition our business to the cloud have limited our ability to expand earnings per share near term, they've been important to ensure that Oracle remains a technology leader.
With Cloud overtaking new software license revenue, we expect our business to once again exhibit the same pattern we delivered over the previous decades as a license business, increasing revenue that results in EPS and cash flow that grow even faster. We continue to use constant dollar growth rates on our quarterly calls so that we can have some measure of consistency across the quarters as well as to reflect how we measure the business. This quarter, the effects of currency movement were more than what I had included in my guidance, mostly because of the strengthening U. S. Dollar after recent elections in U.
S. And Europe, resulting in a currency headwind of 1% of total revenue, 2% in some revenue categories and $0.01 to EPS. The devaluation of the Egyptian currency last month also negatively impacted EPS by a second penny. None of this was in my guidance for the quarter. Cloud, SaaS and PaaS revenue for the quarter was $912,000,000 up 89% from last year.
You can also see the continuing acceleration of our cloud business in the SaaS and PaaS billings and deferred revenue. The gross deferred revenue balance is now over $1,600,000,000 up 51% in U. S. Dollars. And SaaS and past billings grew 39% in U.
S. Dollars this quarter. We've put the billings numbers up on our website for you to see the detail as usual. When you add together cloud SaaS and PaaS revenues and new software license revenue, they grew 5% in constant currency. And by the way, database as a service and database new software license revenue together also grew.
These are significant milestones in our transformation, where the combination of our cloud and new software license businesses, added together, are growing. As cloud becomes an even larger percentage of the total, the growth will only accelerate with earnings and cash flow following along. As our SaaS and PaaS business continues to scale and grow dramatically, the gross margin continues to expand. Q2 gross margin for staff and PAC was 61%, up from 43 percent last year, and I expect to see further improvement in Q3 and Q4. And from there, we'll be targeting 80%.
Cloud Infrastructure as a Service revenue was 175,000,000 dollars up 9% from last year. The Q2 gross margin was 37%. Now that's lower than prior quarters as we are making the necessary investments to scale out this business. Now I want to spend a moment explaining it to you because you're going to see some effect. What's happening with the Infrastructure as a Service gross margin is similar to what we experienced with the SaaS and PaaS gross margin, except that it's also much smaller revenue base.
And thus the margin impact is more at the beginning. To refresh for everyone, when we invested in our FastPath business in advance of the revenue scale out, the gross margin declined 15 percentage points before bottoming at 40%. It's now up to 61%, and as I just mentioned, we're climbing to 80% over time. Similarly, I expect the Infrastructure as a Service gross margin will decline further over the next few quarters as we make investments in the business that hit our expenses immediately while the revenue is recognized over time. But for modeling purposes, I would use 20% as a trough gross margin.
Probably doesn't need to go quite that low, but just for modeling purposes, you can aim there. After which, I expect the gross margin will climb to minimally 40% as the business scales, probably higher. Total cloud revenue in the quarter was over $1,000,000,000 for the first time at nearly 1,100,000,000 up 69% in constant currency from last year. Total on premise software revenues were $6,100,000,000 with software updates and product support revenues at $4,800,000,000 up 3% from last year. Attach and renewal rates remain at their usual high level as our installed base of customers continues to grow.
New software license revenues were slightly over $1,300,000,000 Now that is down 19%, reflecting the continued emphasis on and migration to cloud. Total hardware, including hardware support, was down 9% with hardware system product revenue of $497,000,000 and hardware support revenue of 517,000,000 dollars We are proactive and just so that you know, we are proactively evaluating our expense infrastructure needed to support the on premise hardware business in light of on premise hardware revenue declines and the new availability of IaaS for those customers. For the company, total revenue for the quarter was $9,100,000,000 up 2% from last year. Non GAAP operating income was $3,800,000,000 up 3% from last year, and operating margin was 42%, up from 41% last year. The non GAAP tax rate for the quarter was 25.5%, considerably higher than last year's 20.4%, which had been favorably impacted by some onetime benefit.
Now in view of possible changes to the U. S. Corporate tax system, normalization of our geographic earnings and other factors, the likelihood of favorable impacts to our tax rate over time is higher, but obviously not certain. Non GAAP earnings per share was $0.61 in U. S.
Dollars. The GAAP tax rate was 24.3%. The GAAP EPS was $0.48 Operating cash flow over the last 4 quarters was $14,200,000,000 dollars Capital expenditure for Q2 were $757,000,000 with cloud CapEx accounting for approximately 40% of the total, with the rest being real estate. Free cash flow over the last four quarters was $12,600,000,000 up 10% from last year. We now have approximately $58,000,000,000 in cash and marketable securities.
Net of debt, our cash position is approximately $4,000,000,000 The short term deferred revenue balance is $7,400,000,000 up 8% in constant currency. This quarter, we purchased nearly 13,000,000 shares for a total of $500,000,000 which is less than prior quarters due obviously to the use of our cash for the acquisition of NetSuite. Over the last 12 months, we've repurchased 172,000,000 shares for a total of $6,700,000,000 and we paid out dividends of $2,500,000,000 And the Board of Directors again declared a quarterly dividend of $0.15 per share. Now to the guidance. I'm going to provide guidance for Q3, then some updated comments about the whole year.
Given recent currency movements, we expect to see continued volatility in exchange rates and significant currency headwinds. Today, again, with a very significant day in currency with the dollar strengthening. I'm going to give you constant currency guidance, but if current exchange rates remain just about where they are right now, we expect to see a currency headwind of at least 1% on revenue and at least $0.01 to EPS. All of my guidance today is on a non GAAP basis. With that, my guidance is as follows: SaaS and PaaS revenue, including NetSuite, is expected to grow 82% to 86%.
Software and cloud revenue, including SaaS, PaaS and IAS, new software license and software support is expected to grow 4% to 6%. Total revenue is expected to grow 3% to 5%. EPS is expected to be between $0.61 $0.64 in constant currency. Now this assumes a non GAAP tax rate of 25.5%, which is considerably higher than the 22.6% reported last year. As a reminder, last year's tax rate was lower mostly due to the catch up of benefits related to the USD the U.
S. R and D tax credit. Of course, the Q3 tax rate could be end up being different. Over the full year, FY 'seventeen, I'm raising the outlook for FY 'seventeen SaaS and PaaS revenue growth from 67% to 80% with NetSuite now added and continued strengthening in our SaaS and PaaS business. I continue to expect SaaS and PaaS gross margins will exit Q4 higher than the 61% reported today as our cloud business continues to grow dramatically.
Lastly, I expect our total CapEx spend for the year will be in the range of about $2,000,000,000 with over half of it being due to non cloud real estate investments that we made this year that will not be repeating next year. With that, I'll turn it over to Larry to Mark for his comp.
Thank you. As usual, I'm just going to give you a slew of numbers here and try to give you some context on our quarter. Everything is year on year in CD unless I say otherwise. Cloud bookings for the quarter, 3 $77,000,000 Now Q2 was the best non Q4 we have ever had. I'll make a prediction that Q3 has a chance to be our best ever quarter period.
SaaS bookings were 2.17 in USD and PaaS infrastructure bookings were 1.60 in USD. Now just let me give you some numbers by pillar as it relates to our SaaS Pass revenue. We were up 89%, more than 30% higher than Amazon, Salesforce or Workday. ERP had 104% growth quarter on quarter, 8th consecutive quarter with sequential growth greater than 50%. HCM grew 131% again this quarter.
That's 4x the growth rate of Workday. CX customer experience grew 15% organically. Service was up 24%. Data as a service up 71% database as a service up 700% and already at $100,000,000 in quarterly revenue. PaaS was up 600% and overall SaaSPaaS grew 89%.
SaaSPaaS billings grew 39% in USD. SaaSPaaS deferred revenue 51% in USD. Now just some customer metrics. IDC recently released their SaaS market share estimates, and Oracle is now the number one market share in enterprise SaaS. In the quarter, we got almost 1100 new SaaS customers, 1082 to be exact, and had 810 expansions.
In CX, we had 4 43 new customers, 5 17 expansions. In HCM, we had 224 new customers and 212 expansions. In ERP, we had 532 new customers, and that does not include NetSuite. We got 91 expansions. Over half of the new ERP customers never had an Oracle app before they bought this quarter.
Our active base now of 3,269 customers with 1275 live, over 10x greater than Workday. In total, we now have almost 13,000 customers in our SaaS active base and 25,000 if you actually include NetSuite. Fusion Cloud is now nearly 2 thirds of our new customer wins. This is a big deal for us because it was 10 years actually writing this code and is now the bulk of our SaaS business. 348 go live, best quarter ever.
2,116 customers are now live on Fusion. We got 2,225 new platform customers in the quarter, and our installed base now sits at 12,168. We got 2,148 infrastructure customers. They are buying standalone infrastructure services. And together, our installed base PaaS and infrastructure now sits at 21,219 customers.
Now as a point of clarification, PaaS and infrastructure customers are counted for each service that's used. Now let me just give you names of a few customers in the quarter. I'm going to go through just a couple of pillars. First, an ERP. So I'm giving you a list of ERP customers who purchased in the quarter.
Canon, Deutsche Telecom, DICK'S Sporting Goods, FedEx, Ferguson, Hasbro, HILMOM, Koch Industries, Noble Energy, Ricoh, Skanska, Texas Instruments. I'm going to give you a list of HCM customers in the quarter: Berkshire Hathaway, Cummins, Dubai Airport, Kaiser Foundation Hospitals, NETGEAR, ON Semiconductor, Siemens, Skanska, Sonic Automotive, Tesco, the Hearst Corporation. It was a solid quarter for us. And lastly, let me just sort of describe where I think we are. We not only had strong revenue in billings as well, but our Q2 billings were solid at 39%.
Q3 has a chance to be our best quarter ever. Q2 revenue was fantastic at 89%, and we've clearly crossed the revenue chasm. We are clearly the fastest growing cloud company at scale. And with that, I'll turn
it over to Larry. Thank you, Mark.
Historically, I've measured Oracle performance by comparing our technology and our market share to our 2 primary competitors, SAP and Applications and IBM and Infrastructure and Database. That changed as we move to the cloud. In the cloud, we measure Oracle against salesforce.com and applications and Amazon Web Services and Infrastructure and Database. Our cloud applications goal is to be the world's largest and most profitable SaaS company. We are growing our cloud business much faster than salesforce.com, and we can beat them to the $10,000,000,000 mark, but it's going to be close.
IDC already recognizes Oracle as the number 1 in annual SaaS sales to large enterprises. Salesforce.com is number 2. We will book more than $2,000,000,000 in annual cloud sales this year, much more than salesforce.com. We are catching up to them and we're catching them very quickly. Our goal in infrastructure and database is to be number 1 running database workloads in the cloud on our infrastructure as a service.
The Oracle database has a huge technical and market share lead over the Amazon Web Services databases, Azure and Redshift. But much more importantly, the Oracle Cloud Infrastructure as a Service runs the Oracle database workloads much faster, more reliably and at a significantly lower cost than the Oracle database running at Amazon's IaaS. We are making a multi year generational shift to the cloud, and we're well on our way to being number 1 in both cloud applications and cloud database. And we're doing it with very little or no compromise to our earnings or our cash flow. With that, I'll open it up for questions.
And our first question will come from the line of John DiFucci with Jefferies.
Thank you. My question is for Mark. Mark, our field checks this quarter led us to believe that cloud traction accelerated beyond what you had been doing, which was pretty good, very good. And we thought this might have a negative effect on license, which sort of comes through in the increased decline in license. But with ARR growth of 30%, I'm not sure that doesn't seem to be indicative of increasing cloud traction.
Can you help us resolve this? I mean, what we're hearing in the field and the numbers, what the numbers seem to indicate, is it as simple as 30% ARR growth may not be the 42% of last quarter, but it's still pretty good off such a large number or is there something else going on?
All right. Let me go into bigger than the math to start with. Our pipeline is really big. Our wins are pretty big, are quite big as well. Not as I mentioned in my script and I may have gone over it too fast, first of all, I think we had a good quarter in ARR.
So these are the days when 30% growth, gee, I wish it was higher. I like 30% growth. That said, we can do a lot better. And what I said about Q3, so Q2, just to go back to that number, is the best non Q4 we have ever had in terms of bookings. I think there is a chance and I'll repeat it again, Q3 is the best quarter we've ever had, we could ever have period.
That's how good I feel about our pipeline, how good I feel about our positions, deals that I don't usually talk about deals we've won in early Q3, but that's how strong our position is going into quarter. And my guess, John, is that's why you hear what you hear from your fuel checks and deals we won. We may not have contracted it, put on a piece of paper, but we feel really strong about our position. Larry talked about the $2,000,000,000 for the full year. So that would be my response, John.
And if I could, just to
be clear, when you're talking right now, when you're talking like because there's a lot of terms like ARR, billings, bookings, and I'm going to stick with your ARR number because that's what you guys when you first started talking about this. When you're talking about this could be the best quarter ever, you're talking about what you've traditionally called ARR, which is new annual recurring revenue?
Yes, John. And you're right. We are passing a lot of different numbers to you. I think we're trying to be very transparent with all the deferred numbers and the billings and so forth. But the comment I made directly related to new ARR new and expansion ARR bookings.
And that is, in the end, a very good surrogate for how we'll perform. So I think the big number though back to it is the full year number that we described. And so you may see some things in the quarter that go up or down, but the full year $2,000,000,000 number is where we sit.
Great. That is very clear and very helpful. Thanks.
Thank you, John.
And our next question will come from the line of Mark Moerdler with Sanford Bernstein.
Thank you. Can you give provide us more details and insight into NetSuite, its impact on Q2 revenue margins, etcetera, and its impact going forward, I really appreciate.
Well, we got NetSuite in Q2 about, as I said, I think as I thought I said that maybe I didn't mention around November 7. So we didn't even have a full month. So it's around $50,000,000 It's basically a wash on the on all the other lines, as you know, since we just got it. Its revenue track is very similar to what it's been doing. However, as you know, NetSuite doesn't grow as fast as our cloud business grows, nor is it as profitable.
So over time, we're going to bring it to where we're doing, and we also hope to accelerate it actually because our product line is so much broader, including EPM and things like that. So this quarter, I could refer to it as a wash. And as we own it over time, we expect to be able to leverage it. And but it does it doesn't grow, obviously, as fast as our ERP business does.
Excellent. And if you could give us, over time a little more color on that, that would be great. I really appreciate it. Thank you.
Okay. I will.
And our next question will come from the line of Keith Weiss with Morgan Stanley.
Excellent. Thank you guys for taking the question. You mentioned during the made that comment. One of the questions that I get a lot from clients and wanted to ask of you is, are we seeing the positive impacts of the 12 cycle? Is that already showing up in terms of options driving that number higher on the license side?
And is it database as a service offering Is it a new 12 c offering driving people to that cloud offering as well? Or is it still really early days in terms of that cycle and this is just core database growth, if you will?
Yes. It's really early days. And actually, 12.2 is only available right now in our cloud and database as a service. So it really isn't available on premises yet. So our policy is cloud first, including the release of our latest technologies.
So again, we're very, very early on in terms of the 12.2 cycle and it impacting our database license business.
Yes. So really, all you're seeing is just the strength of our database business. It's a very, very strong business generally because it is by far the best and we've been gaining market share now really for years. And that just continues because it meets the needs of so many customers.
Got it.
And if I could just have one follow-up, albeit early days. You gave us an update a while ago on the options and talking about some of these options being the most well as the options that you've seen. Has that trend continued or you continue to see strong adoption of some of those new options on 12c?
I think people are again, people are using these options in the cloud. I think they're very excited about using them both in the cloud and on premise. And I think it's going to have a positive impact, a very significant impact on both our database as a service and our on prem license business.
Our next question will come from the line of Kash Rangan with Bank of America Merrill Lynch.
Hey, guys. Happy holidays. One question for Saffra and one for Marcus, if that's okay. A question for you, Saffra, with respect to your cloud transition, one of the things we keep looking for is gross profit growth rate. And you've been able to show that 2 quarters, Rowan.
I think for the first time, we also saw op income growth rate. Are you still confident that on an organic basis that you can continue to accelerate op income growth rate? And if so, what will contribute to that? And one quick one for Mark, if I could. Can you comment on what the Accelerated Buying Experience program means for the company's growth rate future?
Thank you so much.
Okay. Well, obviously, I think what you're starting to see, we've got a bunch of things going on. They're all positive. We have revenue growth. We have operating income growth, and I think you're going to see that actually accelerate.
So as SaaS and PaaS really take off, this is going to show up. And as I mentioned as I want to make sure I reiterate from Financial Analyst Day, once again, we are expecting double digit earnings growth also and in FY 'eighteen. So this is you'll hear me say that many times, and you're starting to see the upturn.
Kash, you didn't ask me a question.
I was the only one left out.
It's okay. So I'm going to chime in here
and just say, there are huge economies of scale in this business. So as we scale it, that's why it's so important that we become number 1 in SaaS. There's just tremendous advantages of being number 1. There are huge economies of scale. It contributes enormously to our profitability in the business, both in SaaS and being number 1 in database and cloud.
To your other question, accelerated buying experience continues to progress. We launched it really less than a year ago. This is our Q3 really doing it. We've got about now 70% of our transactions, not necessarily our dollar volume going through. And our customers are just to be very frank, it's very well received and it's happier.
It's just easier to do business and to get a contract with Oracle now than it's ever been. And it's great when customers are happier. Our next target is really to focus around their overall experience in the cloud after the purchase. So, ABE or accelerated buying experience really focused on the actual purchase and the contract. Our focus now is really after that contract and between the contract signing and the renewal.
And to that end, on December 1, I announced a group inside Oracle called the Oracle Cloud Global Service and Support Group. And it really pulls together all the various organizations around the company that had touched our cloud customers and brings them together into an organizational unit, focused solely on pleasing and delighting our customers and giving them the absolute best customer experience they can possibly have. We want to become and define what the best cloud experience is in the industry for our customers. So think of that as the follow on to the accelerated buying experience and we've announced that effective December 1.
Thanks, Safra, Mark and Larry.
And our next question will come from the line of Ross MacMillan with RBC Capital Markets.
Thanks a lot. I had one for Safra and then maybe one related for Larry. When we think about CapEx this year guided to $2,000,000,000 dollars a bit less than half on cloud. So that $1,000,000,000 run rate, is that the right level of CapEx that we should be thinking about even beyond this year? Or will it grow as the total cloud grows?
And then related to that for Larry, is infrastructure as a service a necessity as opposed to platform as a service if you are going to be able to migrate existing on prem database workloads to the cloud?
Okay. So two things are happening. As you grow in both IAS and PAD, you do get first an investment period and then you really have economies of scale, which we should see. So it will not grow linearly at all. So it will grow as a depending on how successful we are, but it's growing upfront, then it's going to slow down, get used and then grow as a smaller and smaller percentage.
And that's what we are expecting. As far as our capital spenders shared this year, we obviously very much front loaded both some of our Cloud investment and also our real estate investment, which will not be sort of the big chunk it is right now as it was this year.
The question about infrastructure as a service, is it essential? The answer is yes. If you want to move existing database workloads to the cloud and minimize the changes customers have to make as they migrate. In other words, make it a graceful, easy lift and shift. We can configure our cloud network to match their network.
We can configure other servers to match their capacity of their servers, configure storage, get deliver exadata and service, do all of that with virtually no disruption to what they're doing. They press a button, move their database, move their workloads, and it just runs pretty much like the way it ran. They don't have to retest the application. They can just move it and it will just run. Then we absolutely need an infrastructure service in combination with our platform as a service.
We need both of them to do that gracefully. So it is an essential. We've been in this infrastructure as a business technology development phase for a long time. We're rolling it out to customers again early days, but it's being very, very well received. Of course, the litmus test is can we do it better than Amazon?
Could our infrastructure is a big question, can Oracle's infrastructure as a service differentiate itself from Amazon? Can we do it more gracefully, more reliably, less expensively, more securely than Amazon can? And we think we can. That's going to make us very, very competitive.
And our next question will come from the line of Sarah Hindlian with Macquarie.
Safra, this one's really for you. So one of the big things we can ask about and would love some help on is as more and more customers are pivoting to Oracle Cloud, you still maintain this very high renewal rate on the maintenance stream. And I'd love to know a little bit more about how we should be thinking about the maintenance the updates and support longer term and the trajectory on that line. Even as new licenses are declining, you're still selling licenses. So how should we be thinking about that longer term, Safra?
And then a real quick second one for Mark around the hardware business. And we didn't spend a whole lot of time on that today. I would also love to hear how you're thinking about that business longer term as well. Okay. So you're right in that our renewal rates remain very high.
However, as you know, we don't renew 100% of our license updates and product support. And as the new software flatten out and actually go down. That's a ways out so far, and we actually don't have any indication of that because we continue to sell quite a lot in new software licenses. However, ultimately, we would be it would be a I know it's hard to imagine a good outcome, but it will mean that we are getting an extremely large number in our SaaS path number, one that actually is dwarfing not only new software license, but new software license and any kind of decline in the software support number, such that the whole software number, which is SaaS, PaaS, new software license and support, is all going up and actually accelerating.
Yes. Before I go to the hardware thing, the our renewal rates in software for the quarter, we usually just tell you they're about the same. To be very exact, they actually went up. So our cancellation rates were down in the quarter. So we have a very strong renewal rate in our software business.
Now that said, we are actually in many cases trying to convert our customers to cloud. So just to be clear, that means for us more money. That means for us more margin. So it is clearly our objective over time, let's take the applications business to migrate our on prem applications customers to our cloud applications. And as Larry mentioned, our database customers on prem to our infrastructure and platform.
And we believe as you all very well most of you at least very well know the math, that means for us a larger recurring revenue stream and as our margins continue to climb, that means more earnings for us and we think a great experience for our customers as well. Hardware, really more
of what we've talked about, sort
of the reason we haven't talked about it much. We had a very good Engineered Systems quarter. Again, Engineered Systems grew in both bookings and revenue in the quarter. That ecosystem continues to be very successful, very profitable for us, does a great job for us. We had declines in what you would think of as our traditional server business.
And those declines offset the growth in Engineered Systems. So it's really the tail of sort of 2 product lines, Engineered Systems growing, the traditional server product line declining. Now this is the last quarter, this being Q2, that you will see the declines because of the acquired GBU products. So we bought a couple of micros, for example, a couple of years ago, 1.5 years ago. It had a bunch of 3rd party products that we actually stopped.
That's actually hurt the growth rate of the hardware line that begins to end as we go into Q3. So those are sort of the three factors, the 3rd party products in our micros business, growth in Engineered Systems and decline in the traditional service business.
All right. Thank you. That was very helpful. Appreciate it.
Thank you.
Our next question will come from the line of Michael Turits with Raymond James.
Good evening, everybody. Just a question mostly for Safran for Mark on license. New software license declined 19 percent constant currency. Does this mean that license declines could continue to steepen going forward? And maybe I'll ask the second part of my question at the same time, which is database as a business overall grew.
So if you could talk to us about how database license did within database within license overall?
So let me at least get started with that. No, I actually am not expecting next quarter for it to decline even at the 19% rate because the big decline has been in the application side as SaaS has really overtaken our apps business. And as apps have gotten smaller, the base itself is not is small that when it declines, it has a smaller impact on our overall new software license. Now ultimately, at one point, you'll see the same happening in database. But the reality is you're not seeing it in database at this time because our installed base of usage continues to increase at all levels, on premise and in the cloud simultaneously.
Once again, no one asked me the question, but
I use that as a great opportunity to answer it anyway. So let me be clear. So if you convert, if you move from the Oracle E Business Suite on premise, and then you take up Fusion ERP in the cloud, and we encourage you to do that, right? And we want you to do that. You cancel your support for the Oracle ERP on premise, what we call the E Business Suite, and you start paying us a monthly fee for Fusion, Okay.
So even support, not only new license go down, but even support goes down because you make the shift and we want you to do that because we make a lot more money that way. However, in database, if you bring database to infrastructure as a service, you need to own the database license. You never cancel your database license and support. That goes on forever. So as people migrate, let's say you take the Oracle database to Oracle Infrastructure as a Service, you still pay your support.
And if you need more, you buy more license more database. Let's say you take the Oracle database to Amazon. Well, you need your Oracle database and you need more of it, you got to buy more of it and license more of it and you have to keep paying support. So they're very different businesses. They've got to be they're profiled very, very differently.
So as Safra said, a lot of license decline is attributable to our applications business, which is getting of which the on prem application business is getting smaller and smaller. The database business, license business, both that is growing. So these are very these will be both these businesses will react very differently in the cloud. Very it's not an unlikely outcome that our database license business goes on forever. And the associated support goes on forever, even though customers are running that, that database now not on their own computers, but on our infrastructure as a service or Amazon's infrastructure as a service or Azure's infrastructure as a service.
So you have to model these two businesses entirely differently.
Thanks, Laurie. I didn't mean to leave you out. No, no, no. I appreciate the color.
I know I'm getting old. And this is complicated stuff. I realize you don't want to wear me out during the call. So I appreciate your consideration.
Thanks. Thanks very much. Okay, guys. Thanks a lot. Thank you.
And our final question will come from the line of Raimo Lenschow with Barclays.
Thanks for taking my question and it's great to see your CTO so busy on the call. My question is actually for Mark. Mark, can you talk a little bit about what you see in the different regions? You talked about the products, but just wanted to hear how you see the regional performance. If I look at the numbers, Asia was very strong, U.
S. And you're moderated a little bit. Can you just talk what you see in terms of end demand there? And then Safra, did I understand did I hear you correctly that you talked about double digit EPS growth in 'eighteen? Just wanted to clarify that.
Okay. By the way, just to be clear to the CTO's earlier point, as it relates to apps and applications business, we actually don't compensate our salespeople for applications on premise. So just to be clear, to connect these dots in terms of how we actually operationalize the company, our salespeople in the applications ecosystem sell SaaS. So if they sell we have small SWAT teams in our what we would call our Oracle direct organization that really help our existing users by incremental seats if they need to their existing on premise applications. So I only say that to you because all of this is planful on our part.
Our objective is to move to SaaS to get us clear about our direction in SaaS and it's resulted in this leadership position in enterprise SaaS that we discussed earlier. So this is all very planful on our part. To your question about the regions, all of our regions the region that had the toughest time in the quarter was Latin America. And Latin America has been historically and still is one of our best regions in terms of our performance of our team, etcetera. But they're going through all of the things that you all know about in Brazil, some of the issues that have cropped up now in Mexico.
But now at the same time as Latin America has had a little bit of a tough time, they are gaining significant market share in that market. So while the numbers in Latin America are more perhaps not as good as we all would love or have been in the past, their relative performance compared to their peers is fantastic. So I'm actually very proud of them in spite of the fact that the absolute dollar value they'd see. Save that, our Europe and North America regions performed roughly as I would have expected. I continue to believe our European organization has done a tremendous job over the past several years.
They, in addition, have done a tremendous move over to cloud. Their absolute bookings on an overall basis just taking license and cloud combined grew. So very significant. I'm pleased with North America as well. I mean, they were roughly as we expected.
On the flip side, I would say Asia has been superb. I think Asia has done a nice turnaround. It wasn't a couple of years ago, we'd sit on a call and get questions about some of the performance in Asia. We weren't fairly happy with that. We made some changes.
I think the performance in Asia on virtually every metric we see. I'm talking about hardware, SaaS, PaaS, infrastructure and license has been very favorable. So I'm very pleased with the results. Double digit?
Yes, sir. I wanted to just make sure you did hear me right. We are expecting to have double digit earnings growth next year.
I'm looking forward to that.
Okay. Okay. A telephonic replay of this conference call will be available for 24 hours. Dial in information can be found on the press release issued earlier today. Please call the Investor Relations department with any follow-up questions from this call.
And we look forward to speaking with you. Thank you for joining us today. With that, I'll turn the call back to the operator for closing. Happy holidays.
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