Oracle experiences gradual income progress as its license and hardware companies decline
Safra Catz, Co-Chief Executive Officer of Oracle Corp., speaks during the SelectUSA Investment Summit on Monday, June 19, 2017, in Oxon Hill, Maryland, USA. The SelectUSA Investment Summit brings together economic development companies from around the world, organizations from all over the nation and other parties promoting FDI in the United States.
Eric Thayer | Bloomberg | Getty Images
Oracle shares fell as much as 2% in extended trading Thursday after the company posted earnings in the second quarter that exceeded analysts' expectations. Shares rebounded after the company issued a better-than-expected quarterly forecast.
This is how the company did it:
Merits: $ 1.06 per share, adjusted versus $ 1.00 per share as analysts expected, according to Refinitiv.Revenue: According to Refinitiv, $ 9.80 billion versus $ 9.79 billion as analysts expected.
Oracle's revenue rose nearly 2% year over year for the quarter ended November 30, according to a statement. In the previous quarter, sales rose by almost 2%.
The company pointed to the growth of cloud services, which are in greater demand this year as the coronavirus has forced many corporate employees to telework. At the same time, it continues to provide more traditional services to businesses, some of which have been hard hit by the pandemic.
"We would have achieved more revenue growth if we hadn't had any capacity constraints at OCI in the second quarter," said Larry Ellison, co-founder and chairman of Oracle, the analysts in a conference call. He was referring to Oracle's cloud infrastructure that competes with Amazon Web Services and Microsoft Azure.
Oracle's largest business, cloud services and license support, had revenue of $ 7.11 billion, up 4% year over year and above the consensus estimate of $ 7.04 billion among analysts surveyed by FactSet . Oracle's revenue from second-generation cloud infrastructures rose 139% for the quarter, Oracle CEO Safra Catz said on the conference call.
However, smaller parts of the Oracle business declined. The company's cloud licensing and on-premises licensing segments contributed $ 1.09 billion to revenue, down 3%. Analysts polled by FactSet had searched for $ 1.13 billion.
Oracle's hardware sales were $ 844 million, a 3% decrease, despite being just above the FactSet analyst consensus of $ 838 million. The company's $ 752 million service revenue was slightly higher than the consensus of $ 750 million, but was down 7%.
"So the pandemic has some negative effects, some positive effects on us, simply because of our size and breadth of customer base, it affects them differently," said Catz. "And so, obviously, our hospitality customers have had a tough time. Some of our retail customers did terrible, others did very, very well."
In the quarter, President Donald Trump said he had basically agreed on a deal to move US user data for the TikTok video sharing app to Oracle's cloud infrastructure. Oracle said it would become a 12.5% owner of TikTok Global as part of the deal. The deal is not final.
Oracle also announced the availability of a cloud service that enables organizations to monitor the health of various parts of applications running in clouds and on-premises centers.
With regards to the guidance, Catz expects the company to achieve adjusted earnings per share of $ 1.09-1.13 and annualized revenue growth of 2-4 percent for the third quarter of fiscal year. Analysts polled by Refinitiv had expected adjusted earnings per share of $ 1.04 and revenue of $ 9.95 billion, representing a growth of 1.5%.
Excluding the after-hours move, Oracle's shares are up about 12% since early 2020, while the S&P 500 is up nearly 14%.
CLOCK: Salesforce CEO praises former boss Larry Ellison for the TikTok deal