Oracle Earnings: Another Quarter, Another Miss
Shares of Oracle Corp. (NYSE:ORCL) closed Tuesday’s regular session up 1.6 percent at $38.83, just about a dollar shy of a 52-week high, only to fall as much as 5.2 percent in post-market trading. The reversal came after the technology company reported fiscal third-quarter results that fell short of analyst expectations, and the poor performance could drive the stock to a year-to-date loss come the start of trade on Wednesday.
Oracle reported total revenues of $9.3 billion, up 4 percent on the year but just short of the 4.3 percent growth to $9.34 billion that was the mean analyst estimate. Total software revenues, which account for about 75 percent of total Oracle revenues, increased 5 percent on the year to about $6.98 billion. Hardware systems revenues, which account for about 14 percent of total, increased 7 percent on the year to $1.3 billion, and services revenue, about 11 percent of total, decreased 4 percent on the year to about $1 billion.
The real top-line action at Oracle is in its growing cloud business. Oracle President and Chief Financial Office Safra Katz reported in the earnings press release that ”In constant currency, our Cloud Software Subscriptions revenues grew 25% and our Engineered Systems revenue grew more than 30% in the quarter.” President Mark Hurd added: “Sales of Oracle’s Cloud Applications accelerated sharply in the quarter with bookings growth of over 60%. Our quarterly Cloud Application revenue is now approaching $300 million. All of our strategic Cloud Application Suites, including Fusion Enterprise Resource Planning, Fusion Human Capital Management and Fusion Customer Experience, posted triple-digit revenue growth.”
On the bottom line, Oracle reported net income of $2.56 billion, or 28 percent of revenues, up 2 percent on the year in U.S. dollars and 5 percent on a constant-currency basis. Adjusted earnings per share increased 5 percent on the year to 68 cents per share, short of the mean analyst estimate of 70 cents per share. Cash flow over the past twelve months is up 10 percent to $15 billion.
Oracle’s underwhelming third-quarter results follow an equally underwhelming second quarter. Two weak quarters will probably fuel concerns that Oracle is being outplayed by competitors that took to the cloud earlier and more aggressively, like Salesforce.com Inc. (NYSE:CRM) and Amazon.com Inc. (NASDAQ:AMZN), both of which are aggressively building out cloud offerings.