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Oracle (ORCL) Q2 Earnings & Revenues Top Estimates, Shares Up

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Oracle (ORCL - Free Report) reported second-quarter fiscal 2022 non-GAAP earnings of $1.21 per share, beating the Zacks Consensus Estimate by 9%. The bottom line was up 14% from the year-ago quarter’s levels (up 15% at constant currency or cc).

Management had guided non-GAAP earnings per share growth rate on a year-over-year basis in the range of 2-6% at USD and at cc and be in the band of $1.09-$1.13 per share.

Revenues increased 6% (up 6% at cc) year over year to $10.36 billion and beat the Zacks Consensus Estimate by 1.5%. The top-line performance was mainly driven by strength in the cloud business.

For the fiscal second quarter, Oracle had anticipated a total revenue growth rate — on a year-over-year basis — in the range of 3-5% at USD and cc.

Following the better-than-expected performance, shares of Oracle are up 11.7% in the premarket trading on Dec 10. In the past year, shares of the company have returned 46.5% compared with industry’s growth of 45.8%.

Oracle Corporation Price, Consensus and EPS Surprise

 

Oracle Corporation Price, Consensus and EPS Surprise

Oracle Corporation price-consensus-eps-surprise-chart | Oracle Corporation Quote

 

Revenues by Offerings

Oracle’s Cloud services and license support revenues (73% of total revenues) in the reported quarter increased 6% year over year (up 6% at cc) to $7.554 billion. The upside can be attributed to continued strength in the Fusion, Autonomous Database and Oracle Cloud Infrastructure (OCI) services.

Management noted that the company’s total cloud revenues on annualized basis stood at $10.7 billion and were up 22%. The cloud bookings growth rate was faster than the cloud revenue growth rate, noted management.

Break up of Cloud Services & License Support Revenues

Applications revenues (contributed 41.7% to total cloud services and license support revenues) amounted to $3.149 billion, up 9% year over year (up 8% at cc).

Infrastructure-related revenues (58.3% to total cloud services and license support revenues) were $4.405 billion, up 5% on a year-over-year basis (up 5% at cc).

Cloud license and on-premise license revenues (12% of total revenues) increased 13% year over year (up 16% at cc) to $1.237 billion.

Hardware revenues (7% of total revenues) were $767 million, down 9% (down 8% at cc) on a year-over-year basis.

Services revenues (8% of total revenues) rose 7% (up 7% at cc) to $802 million.

Revenues by Geography

Revenues from the Americas (representing 55.4% of total revenues) increased 9.1% year over year to $5.736 billion.

Revenues from Europe/Middle East/Africa (28.5%) moved up 3.5% from the year-ago quarter’s figure to $2.953 billion.

Revenues from the Asia Pacific (16.1%) declined 1.1% from the year-ago quarter’s level to $1.671 billion.

Expanding Clientele Remains Noteworthy

Management noted that the strategic back-office cloud applications business increased 30% and strategic back-office cloud applications business now has $4.9 billion in annualized revenues. Management noted that revenues from Fusion ERP, Fusion HCM and NetSuite ERP were up 35%, 25% and 28%, respectively.

Consumption revenues for OCI services, which includes Autonomous Database, soared 86% at cc. Cloud customer consumption revenues increased 45% year over year.

Database subscription revenues (including database support and database cloud services) rose 3% at cc.

Growing clientele is helping the company to maintain its leading position in the cloud ERP domain. The migration of several large-scale SAP customers to Fusion ERP cloud and Fusion HCM is a tailwind.

The company has 8,500 Fusion ERP customers and 28,400 NetSuite ERP clients.

Management is optimistic regarding the latest Oracle Fusion Cloud ERP, HCM and EPM applications. The company won Fusion cloud deals from companies, including Abu Dhabi Health Services Company, Nokia, Panasonic, FedEx, Syneos Health, and Sun Life.

The next-generation autonomous database launched by Oracle, supported by ML, is witnessing steady traction. New product introductions, including new OCI managed services, are likely to boost growth in this category. The autonomous database in Gen2 public cloud infrastructure is witnessing a healthy uptake.

Oracle’s latest Exadata Cloud@Customer service offering is gaining traction among on-premise customers. The latest wins include Aviva, Bayer, Ignitis Group, Marsh McLennan and Volkswagen Financial services.

Other noteworthy deal wins for OCI during the reported quarter include Fortum, HUS, Ingersoll Rand, Translink, SoundHound, GoWithFlow and Xerox.

Operating Details

Non-GAAP total operating expenses increased 6% year over year (up 6% at cc) to $5.505 billion. As a percentage of non-GAAP revenues, the figure contracted 10 basis points (bps) at 53.1% from the prior-year quarter’s levels.

Non-GAAP operating income during the reported quarter was $4.855 billion, up 6% year over year (up 7% at cc).

Non-GAAP operating margin remained almost unchanged on a year-over-year basis at 47%.

Balance Sheet & Cash Flow

As of Nov 30, 2021, Oracle had cash & cash equivalents and marketable securities of $22.84 billion compared with $39.31 billion as of Aug 31, 2021.

Operating cash flow and free cash flow for the trailing 12 months ended Nov 30, 2021, amounted to $10.255 billion and $7.137 billion, respectively.

Share Repurchases & Dividends

Oracle repurchased 77 million shares worth approximately $7 billion during the fiscal second quarter. The company also increased the share repurchases authorization by an additional $10 billion.

On Dec 9, 2021, the company declared a quarterly dividend of 32 cents per share payable on Jan 19, 2022, to shareholders as of Jan 7, 2022.

Q3 Guidance

For third-quarter fiscal 2022, Oracle anticipates total revenue growth rate on a year-over-year basis in the range of 3-5% at USD and at 6-8% cc. The Zacks Consensus Estimate for revenues is pegged at $10.55 billion, indicating an increase of 4.6% on a year-over-year basis.

Cloud services and license support revenues are projected to grow 3-5% in USD and at 6-8% at cc for the current quarter.

Oracle expects non-GAAP earnings per share (EPS) growth rate on a year-over-year basis in the range of 2-6% at cc and be in the band of $1.19-$1.23 per share. The non-GAAP EPS growth rate is expected in the range of negative 2% and positive 2% year over year at USD and be in the band of $1.14-$1.18 per share.

The Zacks Consensus Estimate for the same is pegged at $1.14 per share.

Zacks Rank & Stocks to Consider

At present, Oracle carries a Zacks Rank #3 (Hold).

Some better-ranked stocks worth considering in the broader technology space are Arrow Electronics (ARW - Free Report) , Alphabet (GOOGL - Free Report) and Monolithic Power Systems (MPWR - Free Report) .

While Alphabet and Arrow Electronics sport a Zacks Rank #1 (Strong Buy), Monolithic carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Arrow Electronics’ shares have gained 29.1% on a year-to-date basis. The long-term earnings growth rate for the company is currently projected at 27.4%.

Alphabet’s shares have surged 68.5% on a year-to-date basis. The long-term earnings growth rate for the company is currently projected at 25.8%.

Monolithic’s shares have rallied 40.8% on a year-to-date basis. The long-term earnings growth rate for the company is currently projected at 25%.