A month has gone by since the last earnings report for Oracle (ORCL Quick QuoteORCL - Free Report) . Shares have added about 2.7% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Oracle due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Oracle Q3 Earnings & Revenues Surpass Estimates

Oracle reported third-quarter fiscal 2021 non-GAAP earnings of $1.16 per share, beating the Zacks Consensus Estimate by 4.5%. Further, the bottom line was up 20% from the year-ago quarter (up 16% at constant currency or cc). Management had guided non-GAAP earnings per share between $1.09 and $1.30 at USD, and $1.06 and $1.10 at cc.

Moreover, non-GAAP revenues increased 3% (flat at cc) year over year to $10.086 billion, outpacing the Zacks Consensus Estimate by 0.3%. For third-quarter fiscal 2021, Oracle had anticipated total revenue growth rate on a year-over-year basis in the range of 2-4% at USD and 1-3% at cc.

Top Line in Detail

Oracle reported total revenues (on a GAAP basis) of $10.085 billion, up 3% (flat at cc) year over year, primarily led by improvement in cloud business.

Revenues by Offerings

Oracle’s top line benefited from ongoing cloud-based momentum. Cloud services and license support revenues (72% of total revenues) in the reported quarter increased 5% year over year (up 2% at cc) to $7.252 billion.

Break up of Cloud services and license support revenues

Applications revenues (contributed 41% to total cloud services and license support revenues) amounted to $2.952 billion, up 5% year over year (up 3% at cc).

Infrastructure related revenues (59%) were $4.3 billion, up 4% on a year-over-year basis (up 2% at cc).

Meanwhile, Cloud license and on-premise license revenues (13% of total revenues) improved 4% year over year (flat at cc) to $1.276 billion.

Hardware revenues (8% of total revenues) were $820 million, down 4% (down 6% at cc) on a year-over-year basis.

Services revenues (7% of total revenues) declined 5% (down 8% at cc) to $737 million.

Revenues by Geography

Revenues from Americas (representing 53.8% of total revenues) improved 1.1% year over year to $5.424 billion.

Revenues from Europe/Middle East/Africa (29.5%) climbed 5.1% from the year-ago quarter’s figure to $2.981 billion.

Revenues from Asia Pacific (16.7%) advanced 5.1% from the year-ago quarter level to $1.680 billion.

Expanding Clientele Remains Noteworthy

Strategic back-office cloud applications business surged 24% with annualized revenues of $4 billion. Management announced that Fusion HCM, NetSuite ERP and Fusion ERP businesses were up 21%, 22% and 27%, respectively, in the fiscal third quarter.

Markedly, autonomous database consumption revenues improved 55% and annualized consumption revenues for Oracle Cloud Infrastructure (OCI) services soared 123%. Meanwhile, cloud customer consumption revenues grew more than 200%. Also, Autonomous Database revenues soared over 100%.

Additionally, the company is witnessing strong growth in Cloud HCM, which is increasingly being purchased as part of the company’s ERP cloud application suite. Further, the migration of several large-scale SAP customers to Fusion ERP cloud and Fusion HCM remains a tailwind.

Expanding clientele is enabling the company to maintain its leading position in cloud ERP market. Management is optimistic on latest Fusion Cloud ERP deal wins from companies including AJE, Allegis Group, Johnson City, Bed Bath & Beyond, Brightcove, Nextiva, and The University of Chicago. Key Fusion Cloud HCM wins include DeKalb County,  Deutsche Bahn, Micro Focus, Paladin, and Webhelp.

Moreover, the next-generation autonomous database launched by Oracle, supported by ML, is gaining traction among companies including AxiomSL. In the reported quarter, the company added new Autonomous Database cloud customers. New product introductions, including new OCI managed services, are likely to bolster growth in this category. Markedly, autonomous database in Gen2 public cloud infrastructure is witnessing rapid adoption.

Oracle’s latest Exadata Cloud@Customer service offering is also gaining traction among on-premise customers. Latest wins include Oklahoma State University, Arcos Dorados, and City of Phoenix.

Noteworthy deal win of OCI during the reported quarter includes Pierre & Vacances-Center Parcs Group.

Oracle is making every effort to enhance functionalities of cloud-based applications, which is encouraging adoption.

These initiatives are expected to provide the company an edge in the Database-as-a-Service market and reinforce its competitive position against Amazon’s Amazon Web Services.

Operating Details

Non-GAAP operating expenses fell 3% year over year (down 4% at cc) to $5.302 billion. As a percentage of non-GAAP revenues, the figure contracted 290 basis points (bps) to 52.6%.

Non-GAAP operating income during the reported quarter was $4.784 billion, up 10% year over year (up 6% at cc).

Non-GAAP operating margin expanded 297 bps (expanded 247 bps at cc) on a year-over-year basis to 47%.

Balance Sheet & Cash Flow

As of Feb 28, 2021, Oracle had cash & cash equivalents, and marketable securities of $35.864 billion, compared with $38.593 billion as of Nov 30, 2020.

Operating cash flow and free cash flow for the 12 months ended Feb 28, 2021 amounted to $14.659 billion and $12.808 billion, respectively.

Share Repurchases & Dividends

Oracle repurchased 68 million shares worth approximately $4 billion during the fiscal third quarter and paid out dividends worth $2.146 billion during the nine months ended Feb 28, 2021.

Over the nine-month period ended Feb 28, 2021, the company has repurchased shares worth $12.958 billion. The company’s board of directors has authorized an additional $20 billion for the repurchase of shares.

Also, on Mar 10, 2021, the company declared a quarterly dividend of 32 cents per share, up 33% over prior dividend payout of 24 cents, payable on Apr 22, 2021, to shareholders as on Apr 8, 2021.

Q4 Guidance

For fourth-quarter fiscal 2021, Oracle anticipates total revenue growth rate on a year-over-year basis in the range of 5-7% at USD and 1-3% at cc. Oracle expects non-GAAP earnings per share between $1.28 and $1.32 at USD, and $1.20 and $1.24 at cc.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Oracle has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Oracle has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.