Oracle stock drops sharply on guidance

Key Points
  • Oracle beat estimates on revenue and earnings but the stock fell after the company provided its guidance.
  • The company stopped providing specific revenue for cloud infrastructure and platform as a service.
Oracle fourth-quarter-earnings beat the street

Oracle reported better-than-expected earnings for its fiscal fourth quarter after customers spent more money on cloud services.

The stock rose slightly in extended trading after falling 0.5 percent to $46.27 at the close. But after the company provided guidance, the stock tumbled.

Here are the numbers:

  • Earnings: Excluding certain items, 99 cents per share vs. 94 cents expected by analysts, according to Thomson Reuters.
  • Revenue: $11.25 billion vs. $11.19 billion expected by analysts, according to Thomson Reuters.

Oracle said in a statement on Tuesday that revenue rose 3 percent. For the full fiscal year, sales rose 6 percent, marking the fastest growth since 2011. The company didn't disclose new software license revenue in the quarter. CEO Safra Catz said on the company's call with analysts after the earnings release that new software license revenue now includes new cloud licenses and new on-premises software licenses.

Like other large software companies, Oracle has been shifting its focus to cloud-based services. In this quarter Oracle coupled cloud services and license support revenue to produce $6.8 billion, which was up 8 percent year over year.

Revenue for cloud services and license support and on-premises and cloud licenses came in at $9.25 billion, just slightly above the $9.24 billion FactSet analyst consensus.

Oracle offers cloud infrastructure alongside the likes of Amazon, Microsoft and Google. But Oracle's move to the cloud has taken longer than expected, and Amazon and others are growing faster, KeyBanc analysts led by Monika Garg wrote in a recent note.

"This means it could be difficult for Oracle to catch up with its cloud peers," wrote Garg, who has a "hold" rating on the stock.

In the earnings statement Oracle did not provide a specific revenue figure for cloud infrastructure and platform as a service in its fiscal fourth quarter, or the full 2018 fiscal year. Analysts polled by FactSet had expected those services to deliver $470 million, suggesting a growth rate of 18.3 percent.

As for guidance, in the first fiscal quarter of Oracle's 2019 fiscal year, Catz said that the company would have 67-69 cents in earnings per share, excluding certain items, and that in constant currency it would have 1-3 percent revenue growth. The company will adopt a different accounting standard starting in the fiscal first quarter, and during that period it will be affected negatively by foreign exchange rates, Catz said. Analysts had been looking for 72 cents in earnings per share, excluding certain items, according to Thomson Reuters.

For the full 2019 fiscal year, Oracle is expecting to achieve higher revenue growth rates than in the 2018 fiscal year, Catz said.

Oracle stock fell to more than 4 percent below the $46.27 closing price after Catz gave the guidance.

The company's shares are down 2 percent since the beginning of the year. In the quarter Oracle acquired DataScience.com and Vocado and a deal with American Electric Power.

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