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Oracle CEO Larry Ellison Source: Reuters

Oracle (NASDAQ: ORCL), the world's third-largest software maker, reported on Wednesday that quarterly profit rose 27 percent, beating Wall Street estimates, on strong new software license revenue.

Net income increased to $2.04 billion, or 39 cents per share, in Oracle's fiscal fourth quarter ended May 31, which is its strongest quarter each year.

It reported net income of $1.60 billion, or 31 cents, a year earlier.

The company had a profit of 47 cents a share, excluding items, which beat the average analyst target of 44 cents.

"Nobody expected the May quarter to come in as strong as it did," said David Garrity, director of Research at Dinosaur Research.

Shares of Oracle rose 1.6 percent to $22.90 in after-hours trading from the close of $22.55 on NASDAQ. Executives were expected to discuss Oracle's outlook on a conference call later Wednesday.

Sales of new software licenses climbed 27 percent to $3.14 billion from $2.48 billion.

New software licenses are a key indicator of future financial results for software makers because customers also sign maintenance contracts that typically cost 20 percent of the product price per year. Customers may also expand the number of workers using a program that they have already purchased.

"These are strong results and evidence that Oracle's hard-charging sales culture and ever-more-diversified product lineup is paying off," said Andy Meidler, an analyst at Edward Jones.

"Oracle and the rest of technology is an economically sensitive area. We think that software in particular is an area that should see strength, given its productivity enhancing ability."

Revenue after adjustments rose 24 percent from a year earlier to $7.28 billion, beating the average analyst estimate of $6.93 billion.

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