Oracle (NYSE: ORCL) has had a few rough quarters in the recent past. Analysts are concerned that it is taking longer than expected to deliver on the cloud strategy. The recently announced results seemed to dispel some of the concerns as Oracle managed to surpass cloud-based revenue expectations.

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Oracle’s Financials

Revenue for the second quarter was flat over the year, and recorded a 2% growth over the year on constant currency basis to $9.56 billion. The market was looking for revenues of $9.54 billion for the quarter. EPS of $0.80 was ahead of the market’s forecast of $0.78.

Earlier this year, Oracle redefined its business segments and now no longer reports revenues it generates from its Cloud infrastructure and platform services.

Total cloud services and license support revenues grew 3% over the year to $6.64 billion, accounting for 69% of its quarterly revenues. Within the segment, total cloud license and on-premise license fell 9% over the year to $1.22 billion. According to Oracle, the Fusion ERP and Fusion HCM now account for more than $2.6 billion in annualized revenues for the company.

Total hardware revenues reported a decline of 5% over the year to $891 million and Services revenues fell 5% to $817 million.

During the quarter, Oracle repurchased 203 million shares worth $10 billion. It also declared a quarterly dividend of 19 cents per share.

For the current quarter, Oracle expects to deliver $0.86-$0.88 in earnings per share, compared with the Street’s forecast of $0.85 per share. The continued growth in cloud-based revenues is expected to drive the growing margins. Oracle is targeting to end the quarter with revenues growing between 2%-4% over the year.

Oracle’s Focus Area

Oracle currently is focused on delivering on its Autonomous Database initiative. It recently released the next-generation autonomous database, which is supported by machine learning. It is pairing its Autonomous Database with its new Generation 2 Cloud infrastructure that is expected to help drive more market share for the company.

Oracle released its first autonomous database in March this year, leveraging it for heavy analytics and reporting. Last quarter, it released Autonomous Transaction Processing to manage transaction processing and query processing. Both services use machine learning in the database and in the underlying cloud infrastructure to help with patching and tuning the database without human intervention. The ultimate goal of the autonomous function is to lower operating costs by reducing tedious manual administration, and to drive uptime improvements.

Oracle is convinced that the new database will improve its competitive position in the cloud against Amazon Web Services. A few benchmark studies have revealed that the Autonomous Data Warehouse Cloud does have significant performance advantages over Amazon. For instance, a benchmark revealed that the Oracle database ran a workload 11 times faster and eight times cheaper than Amazon’s Aurora database.

It is still early days to comment on how well Oracle’s Autonomous engine would drive Oracle’s next round of growth. There is no denying that companies which are committed to Oracle because of their legacy applications, may still like to continue to work with Oracle. But recent reports suggest that these companies are shrinking, making it difficult for Oracle. Oracle will surely need a revised strategy that can cater specifically to the more agile IT organizations of today. Do you think the new products – such as the Autonomous Database – are geared towards these markets? Will Oracle truly be able to compete with Amazon on the cloud?

Also, do you think Oracle would benefit from acquisition of other players in the database space to add to its portfolio? How about MongoDB, whose addition could provide the NoSQL capabilities to Oracle? MongoDB is currently trading at $85.55 with a market capitalization of $4.6 billion. It recently reported quarterly revenues of $57.5 million with a net loss of $31.2 million and an adjusted net loss of $0.45 per share.

The stock market seems wary and would like to see a few more quarters before passing a verdict on the company’s capability. To drive more confidence in its cloud strategy, Oracle could also benefit from the acquisition of some big players. Its rivals have made some big cloud-based acquisitions recently. For instance, Salesforce acquired MuleSoft for $6.5 billion, and Microsoft acquired GitHub. I have mentioned this before, and I still believe, that Oracle should evaluate the acquisition of Workday or ServiceNow. Acquisitions of either of these companies would add strong cloud capabilities to Oracle’s portfolio. But these are both big, bold moves. Workday is currently trading at $152.06 with a market capitalization of $33 billion. It last reported revenues of $743 million with a net loss of $153 million for the October ending quarter. ServiceNow is trading at $169.92 with a market capitalization of $30.5 billion. It had ended its September quarter with $673 million in revenues and $8.4 million of net income.

Meanwhile, Oracle’s stock is currently trading at $46.24 with a market capitalization of $175.16 billion. It touched a 52-week high of $53.48 in March this year. It has recovered from the 52-week low of $42.57 that it had fallen to in June this year.