Oracle (ORCL Quick QuoteORCL - Free Report) reported second-quarter fiscal 2023 non-GAAP earnings of $1.21 per share, which beat the Zacks Consensus Estimate for earnings by 3.42%. The bottom line was up 7% year over year at constant currency or cc.

Management guided non-GAAP earnings per share (EPS) to grow 1-5% year over year at cc and be $1.23-$1.27 per share.

Revenues increased 18% (up 25% at cc) year over year to $12.27 billion and beat the Zacks Consensus Estimate by 2.01%. The top-line performance was mainly driven by strength in infrastructure and applications cloud businesses.

For the fiscal second quarter, Oracle had anticipated total revenues to grow 15-17% year over year at USD and 21-23% at cc.

Revenues from the Americas added $7.78 billion to the total revenues. Europe/Middle East/Africa added $2.89 billion, while revenues from the Asia Pacific were $1.59 billion.

Oracle shares have lost 6.8% in the year-to-date period compared with the Zacks Computer and Technology sector’s decline of 33.2%.

Revenues by Offerings

Oracle’s Cloud services and license support revenues were up 14% in USD and up 20% in cc to $8.6 billion. Cloud license and on-premise license revenues were up 16% in USD and up 23% in cc to $1.4 billion. For the second quarter of fiscal 2023, Cerner contributed $1.5 billion to the total revenues. The upside can be attributed to continued strength in the Fusion, Autonomous Database and Oracle Cloud Infrastructure (OCI) services.

Cloud Infrastructure (IaaS) revenues were $1.0 billion, up 53% in USD and 59% in constant currency.

Cloud Application (SaaS) revenues were $2.8 billion, up 40% in USD and 45% in constant currency.

Breakup of Cloud Services & License Support Revenues

Applications revenues amounted to $4.08 billion, up 30% year over year (up 35% at cc).

Infrastructure-related revenues were $4.5 billion, up 3% on a year-over-year basis (up 9% at cc).

Hardware revenues were $850 million, which increased 11% year over year (up 16% at cc).

Services revenues rose 74% (up 83% at cc) to $1.39 billion.

Expanding Clientele Remains Noteworthy

Management noted that the strategic back-office cloud applications business increased 26% at cc and now has $5.9 billion in annualized revenues.

Excluding legacy hosting services, infrastructure cloud services revenues grew 69% with an annualized revenues of 3.8 billion, including OCI consumption revenues, which was up 88%, and Cloud@Customer consumption revenues which were up 83%, and Autonomous Database that increased 50%.

Oracle and NVIDIA (NVDA Quick QuoteNVDA - Free Report) announced a multi-year partnership to help customers solve business challenges with accelerated computing and artificial intelligence (AI). The collaboration aims to bring the full NVIDIA accelerated computing stack — from GPUs to systems to software — to Oracle Cloud Infrastructure ("OCI"). OCI is adding tens of thousands more NVIDIA GPUs, including the A100 and upcoming H100 to its capacity.

Operating Details

The non-GAAP total operating expenses decreased 18% year over year (down 15% at cc) to $9.2 billion.

The non-GAAP operating income was $5.1 billion, up 5% in USD and up 12% in constant currency. GAAP operating margin was 25%, and non-GAAP operating margin was 41%.

Balance Sheet & Cash Flow

As of Nov 30, 2022, Oracle had cash and cash equivalents, and marketable securities of $7.3 billion compared with $10.4 billion as of Aug 31, 2022.

Operating cash flow and free cash flow for the trailing 12 months ended Nov 31, 2022, amounted to $15.07 billion and $8.3 billion, respectively.

Share Repurchases & Dividends

This Zacks Rank #3 (Hold) company repurchased 6.1 million shares worth approximately $488 million in the fiscal second quarter. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The board of directors declared a quarterly cash dividend of $0.32 per share of outstanding common stock. This dividend will be paid out to stockholders of record as of the close of business on Jan 10, 2023, with a payment date of Jan 24, 2023. 

Q3 Guidance

Total revenues for the fiscal third quarter, including Cerner, are expected to grow from 21% to 23% in cc and  from 17% to 19% in USD. Total cloud growth, including Cerner, is expected to grow from 46% to 50% in cc and from 43% to 47% in USD.

Non-GAAP EPS is expected to grow between 4% and 8% and be between $1.17 and $1.21 in USD.

Key Recent Developments

Pentagon declared Amazon (AMZN), Alphabet (GOOGL Quick QuoteGOOGL - Free Report) , Microsoft and Oracle as the winners of the multi-billion-dollar cloud computing contract in an announcement that was long pending.

Amazon, the dominant player in this market, is continuously riding on its well-performing cloud platform — Amazon Web Services ("AWS"). The platform has been helping the company maintain its leading position on the back of its growing adoption, popularity and strong services portfolio. It recently unveiled many news services like Amazon DataZone, Amazon Security Lake, AWS SimSpace Weaver, AWS Supply Chain and AWS Clean Rooms.

Google Cloud is continuously contributing substantial growth to the total revenues of Alphabet. Expanding data centers, availability zones and cloud regions are expected to keep boosting Alphabet's cloud position. Google Cloud’s offerings, including Google Cloud Platform and Google Workspace have constantly been gaining momentum. The company’s growing investments in infrastructure, security, data management, analytics and AI have been major positives.