In aggregate, revenue in the software sector was up 2.5% year over year, but dipped by 4.6% sequentially, and net income declined 0.2% year over year but increased by 5.7% quarter over quarter. Results were varied, with Symantec reporting a sharp decline in income due to restructuring and integration charges, while Adobe and VMware saw strong net income growth of 55.2% and 24.6% year over year, respectively.
Widespread adoption of artificial intelligence (AI) across a broad range of industries is expected to drive worldwide revenues from nearly US$8.0 billion in 2016 to more than US$47 billion in 2020, a compound annual growth rate (CAGR) of 55.1%. Nearly half this revenue is attributed to software, which facilitates the development of intelligent, advisory and cognitively enabled solutions.1
Software developers and end user organizations have already begun the process of embedding and deploying AI into almost every kind of enterprise application or process. There is also a booming venture capital market for AI startups.1
The ability to recognize and respond to data flows using algorithms and rule-based logic enables AI to automate a broad range of functions across many industries. The use cases that are attracting the most investment in 2016 are automated customer service agents, quality management investigation and recommendation systems, diagnosis and treatment systems, and fraud analysis and investigation. The industries that will invest the most in AI in 2016 are banking and retail, followed by healthcare and discrete manufacturing. Combined, these four industries will generate more than half of all worldwide AI revenue in 2016.
Big data investments also continue to rise, but are now showing some signs of contraction. In a global survey of 199 IT and business leaders, 48%of the companies have invested in big data in 2016, up 3% from 2015. However, those who plan to invest in big data within the next two years fell from 31% to 25% in 2016. The concern is not so much big data itself, but rather how it is used. Big data is a collection of different data management technologies and practices that support multiple analytics use cases. Organizations are moving from vague notions of data and analytics to specific business problems that data can address.2
For Symantec, this year has been focused on cost savings and realizing synergy from its Blue Coat acquisition. To date it has realized more than US$100 million of the planned US$550 million savings and synergies. Symantec is in talks to acquire LifeLockidentity protection service for US$2.3 billion which it believes will generate increased cross-selling opportunities and improve customer retention.3
Adobe reported year-over-year growth in revenue of 20% to US$1.5 billion. Their Digital Media segment revenue was US$990 million, led by Creative revenue growing 39% year over year to US$803 million. Strong Creative Cloud and Document Cloud adoption helped the company in growing Digital Media annualized recurring revenue to US$3.70 billion in the quarter, a quarter-over-quarter increase of US$285 million. Adobe Marketing Cloud reported revenue of US$404 million. Year-over-year operating income grew 50% and net income grew 55%. The company repurchased approximately 3.5 million shares during the quarter, returning US$344 million of cash. Adobe Systems Inchas plans to acquire TubeMogulIncin a deal valued at about US$540 million net of debt and cash. TubeMogulis a video advertising platform that allows brands and agencies to plan and buy ads across desktops, mobile devices, streaming devices and TV. Adobe will pay US$14 per TubeMogulshare and expects to close the deal in Q1 2017.3
Oracle Corporation reported total revenue of US$8.6 billion in Q3 2016, a 2% increase year over year. Combined revenues from cloud and on-premisesoftware were US$6.8 billion, up 5% year over year. Cloud software-as-a-service (SaaS) and platform-as-a-service (PaaS) revenues were US$798 million, up 77% year over year. Overall top-line growth of these two strategic businesses was driven by non-GAAP SaaS and PaaS revenue growing 82% in constant currency. Oracle has stated it expects to sell more SaaS and PaaS offerings than any cloud services provider for the second year in a row.4
1. Gartner.com, Nov 2016
2. Datamation, Oct 2016
3. Seekingalpha.com, Nov 2016
4. Oracle, Sept 2016