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Oracle (ORCL) Down 1.5% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Oracle (ORCL - Free Report) . Shares have lost about 1.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Oracle due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Oracle reported fourth-quarter fiscal 2023 non-GAAP earnings of $1.67 per share, which beat the Zacks Consensus Estimate by 5.7% and increased 8.4% year over year. At constant currency (cc), earnings increased 10% year over year.
Revenues increased 17% (up 18% at cc) year over year to $13.837 billion and beat the Zacks Consensus Estimate by 0.71%.
Revenues from the Americas jumped 26.6% year over year to $8.58 billion and accounted for 62% of total revenues. Europe/Middle East/Africa climbed 6% year over year to $3.46 billion and contributed 25% of total revenues. The remaining revenues came from Asia Pacific, which declined 0.2% year over year to $1.8 billion.
Top-line Details
Cloud services and license support revenues surged 23% year over year (25% at cc) to $9.37 billion, driven by robust demand for cloud applications, autonomous databases, and Gen 2 cloud infrastructure services.
Cloud license and on-premise license revenues declined 15% year over year (14% at cc) to $2.152 billion.
Cloud revenues (IaaS plus SaaS) came in at $4.4 billion, up 54% year over year (55% at cc). Cloud Infrastructure (IaaS) revenues came in at $1.4 billion, up 76% year over year (77% in cc). Cloud Application (SaaS) revenues of $3 billion increased 45% year over year (47% at cc).
Fusion Cloud ERP (SaaS) revenues came in at $0.7 billion, up 26% year over year (28% at cc). NetSuite Cloud ERP (SaaS) revenues of $0.7 billion increased 22% year over year (24% at cc).
Hardware revenues were $850 million, down 1% year over year (up 1% at cc). Services revenues surged 76% (up 78% at cc) to $1.47 billion.
For the fourth quarter of fiscal 2023, Cerner contributed $1.5 billion to total revenues.
Application subscription revenues, which include product support, were $4.4 billion, up 37% at cc. Application-specific revenues, including support, but excluding Cerner, were $3.4 billion, up 11% at cc. SaaS cloud revenues, excluding Cerner, were $2.4 billion, up 17% at cc on a year-over-year basis.
Infrastructure subscription revenues, which also include support, were $5 billion, up 15% at cc. Infrastructure cloud services revenues surged 89%, with an annualized revenue of $5.2 billion, including OCI consumption revenues, which increased 112%. Cloud and customer consumption revenues jumped 60% and autonomous database revenues were up 47%.
Gen 2 Cloud Driving AI Clientele
Oracle’s Gen 2 Cloud has won a contract worth $2 billion from generative AI customers, thanks to extremely high performance and related cost savings of running generative AI workloads.
The company noted that Gen 2 Cloud is delivering better performance at a lower cost due to some fundamental advantages compared with other hyperscalers.
In Oracle Gen 2 Cloud, the CPUs and GPUs are interconnected using an ultra-high-performance RDMA network, in addition to a dedicated set of cloud-controlled computers that manage security and data privacy, which is helping it to perform better than its competitors.
Moreover, the company has added a fast query processor called Heatwave to its new version of MySQL database, which made it much faster than Amazon’s version of MySQL. Oracle noted that customers are shifting from Amazon Aurora as the addition of Heatwave made query processing 1000 times faster.
In the recently concluded first-quarter 2023, Amazon’s cloud division, Amazon Web Services, reported revenues of $21.3 billion, which rose 16% year over year and accounted for 17% of sales.
High bandwidth and low-latency RDMA networks are enabling Oracle cloud data centers to build large-scale GPU clusters that are used to train generative large-language models. For instance, NVIDIA is using Oracle Gen 2 Cloud to work on AI development.
Oracle is partnering with NVIDIA to build the world's largest high-performance computer, an AI computer, with 16,000 GPUs.
The company also announced that it is launching a generative AI cloud service for enterprise customers.
As of May 31, 2023, Oracle has 42 public cloud regions around the world, with another seven being built. In addition, 12 of these public cloud regions interconnect with Microsoft’s cloud service, Azure.
In terms of performance, Oracle shares have underperformed Amazon but outperformed its other hyperscaler peers like Microsoft and Alphabet year to date. While Oracle has returned 42.4%, Amazon, Alphabet and Microsoft gained 50.7%, 40.1% and 38.4%, respectively.
Operating Details
The non-GAAP total operating expenses increased 23% year over year (up 24% at cc) to $7.681 billion.
The non-GAAP operating income was $6.16 billion, up 10.1% year over year (up 12% at cc). The non-GAAP operating margin was 44.5%, which contracted 270 basis points on a year-over-year basis.
Balance Sheet & Cash Flow
As of May 31, 2023, Oracle had cash & cash equivalents and marketable securities of $10.19 billion compared with $8.21 billion as of Feb 28, 2023.
Operating cash flow and free cash flow for the trailing 12 months ended May 31, 2023, amounted to $17.17 billion and $8.47 billion, respectively.
Remaining performance obligation (RPO) was $67.9 billion, up 47% at cc, due to strong cloud bookings as well as robust demand for Cerner’s solutions. Roughly 49% of total RPO is expected to be recognized as revenue over the next 12 months.
Guidance
Total revenues for the first quarter of fiscal 2024, including Cerner, are expected to grow between 7% and 9% at cc and are expected to grow between 8% and 10% in U.S. dollars.
Total cloud growth, including Cerner, is expected between 28% and 30% at cc. In U.S. dollars, cloud growth is expected between 29% and 31%.
For the fiscal first quarter, Oracle expects non-GAAP earnings to grow between 8% and 12% at cc. The company expects earnings between $1.11 and $1.15 per share.
In U.S. dollars, earnings are expected between $1.12 and $1.16 per share, suggesting growth in the 9-13% range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, Oracle has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Oracle has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Oracle is part of the Zacks Computer - Software industry. Over the past month, Salesforce.com (CRM - Free Report) , a stock from the same industry, has gained 5.8%. The company reported its results for the quarter ended April 2023 more than a month ago.
Salesforce.com reported revenues of $8.25 billion in the last reported quarter, representing a year-over-year change of +11.3%. EPS of $1.69 for the same period compares with $0.98 a year ago.
Salesforce.com is expected to post earnings of $1.90 per share for the current quarter, representing a year-over-year change of +59.7%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.1%.
Salesforce.com has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.
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Oracle (ORCL) Down 1.5% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Oracle (ORCL - Free Report) . Shares have lost about 1.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Oracle due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Oracle Q4 Earnings Beat Estimates, Revenues Rise Y/Y
Oracle reported fourth-quarter fiscal 2023 non-GAAP earnings of $1.67 per share, which beat the Zacks Consensus Estimate by 5.7% and increased 8.4% year over year. At constant currency (cc), earnings increased 10% year over year.
Revenues increased 17% (up 18% at cc) year over year to $13.837 billion and beat the Zacks Consensus Estimate by 0.71%.
Revenues from the Americas jumped 26.6% year over year to $8.58 billion and accounted for 62% of total revenues. Europe/Middle East/Africa climbed 6% year over year to $3.46 billion and contributed 25% of total revenues. The remaining revenues came from Asia Pacific, which declined 0.2% year over year to $1.8 billion.
Top-line Details
Cloud services and license support revenues surged 23% year over year (25% at cc) to $9.37 billion, driven by robust demand for cloud applications, autonomous databases, and Gen 2 cloud infrastructure services.
Cloud license and on-premise license revenues declined 15% year over year (14% at cc) to $2.152 billion.
Cloud revenues (IaaS plus SaaS) came in at $4.4 billion, up 54% year over year (55% at cc). Cloud Infrastructure (IaaS) revenues came in at $1.4 billion, up 76% year over year (77% in cc). Cloud Application (SaaS) revenues of $3 billion increased 45% year over year (47% at cc).
Fusion Cloud ERP (SaaS) revenues came in at $0.7 billion, up 26% year over year (28% at cc). NetSuite Cloud ERP (SaaS) revenues of $0.7 billion increased 22% year over year (24% at cc).
Hardware revenues were $850 million, down 1% year over year (up 1% at cc). Services revenues surged 76% (up 78% at cc) to $1.47 billion.
For the fourth quarter of fiscal 2023, Cerner contributed $1.5 billion to total revenues.
Application subscription revenues, which include product support, were $4.4 billion, up 37% at cc. Application-specific revenues, including support, but excluding Cerner, were $3.4 billion, up 11% at cc. SaaS cloud revenues, excluding Cerner, were $2.4 billion, up 17% at cc on a year-over-year basis.
Infrastructure subscription revenues, which also include support, were $5 billion, up 15% at cc. Infrastructure cloud services revenues surged 89%, with an annualized revenue of $5.2 billion, including OCI consumption revenues, which increased 112%. Cloud and customer consumption revenues jumped 60% and autonomous database revenues were up 47%.
Gen 2 Cloud Driving AI Clientele
Oracle’s Gen 2 Cloud has won a contract worth $2 billion from generative AI customers, thanks to extremely high performance and related cost savings of running generative AI workloads.
The company noted that Gen 2 Cloud is delivering better performance at a lower cost due to some fundamental advantages compared with other hyperscalers.
In Oracle Gen 2 Cloud, the CPUs and GPUs are interconnected using an ultra-high-performance RDMA network, in addition to a dedicated set of cloud-controlled computers that manage security and data privacy, which is helping it to perform better than its competitors.
Moreover, the company has added a fast query processor called Heatwave to its new version of MySQL database, which made it much faster than Amazon’s version of MySQL. Oracle noted that customers are shifting from Amazon Aurora as the addition of Heatwave made query processing 1000 times faster.
In the recently concluded first-quarter 2023, Amazon’s cloud division, Amazon Web Services, reported revenues of $21.3 billion, which rose 16% year over year and accounted for 17% of sales.
High bandwidth and low-latency RDMA networks are enabling Oracle cloud data centers to build large-scale GPU clusters that are used to train generative large-language models. For instance, NVIDIA is using Oracle Gen 2 Cloud to work on AI development.
Oracle is partnering with NVIDIA to build the world's largest high-performance computer, an AI computer, with 16,000 GPUs.
The company also announced that it is launching a generative AI cloud service for enterprise customers.
As of May 31, 2023, Oracle has 42 public cloud regions around the world, with another seven being built. In addition, 12 of these public cloud regions interconnect with Microsoft’s cloud service, Azure.
In terms of performance, Oracle shares have underperformed Amazon but outperformed its other hyperscaler peers like Microsoft and Alphabet year to date. While Oracle has returned 42.4%, Amazon, Alphabet and Microsoft gained 50.7%, 40.1% and 38.4%, respectively.
Operating Details
The non-GAAP total operating expenses increased 23% year over year (up 24% at cc) to $7.681 billion.
The non-GAAP operating income was $6.16 billion, up 10.1% year over year (up 12% at cc). The non-GAAP operating margin was 44.5%, which contracted 270 basis points on a year-over-year basis.
Balance Sheet & Cash Flow
As of May 31, 2023, Oracle had cash & cash equivalents and marketable securities of $10.19 billion compared with $8.21 billion as of Feb 28, 2023.
Operating cash flow and free cash flow for the trailing 12 months ended May 31, 2023, amounted to $17.17 billion and $8.47 billion, respectively.
Remaining performance obligation (RPO) was $67.9 billion, up 47% at cc, due to strong cloud bookings as well as robust demand for Cerner’s solutions. Roughly 49% of total RPO is expected to be recognized as revenue over the next 12 months.
Guidance
Total revenues for the first quarter of fiscal 2024, including Cerner, are expected to grow between 7% and 9% at cc and are expected to grow between 8% and 10% in U.S. dollars.
Total cloud growth, including Cerner, is expected between 28% and 30% at cc. In U.S. dollars, cloud growth is expected between 29% and 31%.
For the fiscal first quarter, Oracle expects non-GAAP earnings to grow between 8% and 12% at cc. The company expects earnings between $1.11 and $1.15 per share.
In U.S. dollars, earnings are expected between $1.12 and $1.16 per share, suggesting growth in the 9-13% range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, Oracle has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Oracle has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Oracle is part of the Zacks Computer - Software industry. Over the past month, Salesforce.com (CRM - Free Report) , a stock from the same industry, has gained 5.8%. The company reported its results for the quarter ended April 2023 more than a month ago.
Salesforce.com reported revenues of $8.25 billion in the last reported quarter, representing a year-over-year change of +11.3%. EPS of $1.69 for the same period compares with $0.98 a year ago.
Salesforce.com is expected to post earnings of $1.90 per share for the current quarter, representing a year-over-year change of +59.7%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.1%.
Salesforce.com has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.