Oracle Stock Rallies on Strong Earnings Report


On a terrible day for tech shares—with the Nasdaq Composite closing down 4.7%—

Oracle

came through with better-than-expected results for the company’s fiscal fourth quarter ended May 31, and strong guidance for the next fiscal year.

In late trading, Oracle shares spiked 12%.

For the quarter, Oracle (ticker: ORCL) posted revenue of $11.8 billion, up 5% as reported, and 10% higher in constant currency. That was up sharply from the $10.5 billon reported in the February quarter, and ahead of the company’s guidance, which called for 3% to 5% growth as reported, and 6% to 8% in constant currency.

CEO Safra Catz noted in a call with analysts that it was the company’s best organic growth quarter since 2011.

“We had an excellent quarter across the board,” Catz said. “What Q4 demonstrates is our business is accelerating. We have real momentum, all around.”

On an adjusted basis, Oracle earned $1.54 a share, ahead of its target range of $1.40 to $1.44 a share. Under generally accepted accounting principles, or GAAP, the company earned $1.16 a share, which was below the target range of $1.35 to $1.39 a share.

Oracle said total cloud revenue was $2.9 billion, up 19%, or 22% adjusted for currency. The company has been making a big push to drive customers for both its database and applications business to the cloud, while growing the Oracle Cloud Infrastructure business, which is trying to compete for customers with Amazon Web Services and Microsoft Azure.

Catz said the company’s cloud business should grow more than 30% in the May 2023 fiscal year.

Oracle said its infrastructure cloud revenue was up 36%, or 39% adjusted for currency. Fusion ERP, the cloud version of the company’s enterprise resource planning software for large businesses, was up 20%, or 23% in constant currency, while NetSuite ERP, which targets smaller businesses, saw revenue grow 27%, or 30% in constant currency.

The company’s legacy software licensing business grew 18% in the quarter, or 25% on a constant currency basis.

“We continued to improve our top line results again this quarter with total revenue growing 10% in constant currency,” Catz added in a statement. “We believe that this revenue growth spike indicates that our infrastructure business has now entered a hyper-growth phase.”

For the full fiscal year, Oracle had revenue of $42.2 billion, up 5% as reported, or 7% adjusted for currency, and the highest growth rate in more than a decade. For the full year, Oracle earned $2.41 a share, or $4.90 a share on a non-GAAP basis.

For the August quarter, Catz projects revenue growth of 20% to 22% in constant currency, including the Cerner acquisition, or 17% to 19% as reported.

She said that cloud revenue will be up 25% to 28% in constant currency excluding Cerner, or 22% to 25% as reported. Including Cerner, cloud revenue growth is expected to grow 47% to 50% in constant currency, or 44% to 47% as reported.

Catz sees August quarter profit of $1.09 to $1.13 a share on a non-GAAP in constant currency, or $1.04 to $1.08 a share as reported, a little below the Street consensus at $1.13 a share.

Catz noted that results are reduced by about $100 million a quarter due to the termination of business in Russia, and reduced revenue from Ukraine.

Oracle bought back $600 million of shares in the quarter. Catz said the company expects to focus on reducing debt from here, while keeping stock repurchases at recent levels.

In a research note on Friday previewing the quarter, Citi analyst Tyler Radke wrote that he was “warming up” to Oracle stock heading into the earnings report.

Radke said that discussion with resellers and channel partners finds “strong and accelerating customer demand” for the company’s core infrastructure and database products, although he sees potential headwinds from supply-chain issues, unfavorable foreign-exchange rates and the potential impact of weakening economic fundamentals.

Radke kept his Neutral rating on the stock, but added that he would consider an upgrade if the growth trend continues.

In his own earnings preview, Morgan Stanley analyst Keith Weiss likewise had expressed optimism about the outlook.

“With increased confidence in the underlying drivers of a modest revenue acceleration in fiscal ‘23, coupled with expectations for operating margins to sustain above prepandemic levels, we think the risk/reward at Oracle presents an interesting opportunity,” he wrote.

Write to Eric J. Savitz at [email protected]



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