Oracle stock drops as revenue falls short

Key Points
  • Oracle's revenue came in under expectations.
  • Larry Ellison said Oracle has no plans to hire a second CEO following the death of co-CEO Mark Hurd.
Oracle Chairman and Chief Technolgoy Officer Larry Ellison delivers a keynote address during the Oracle OpenWorld conference in San Francisco on October 22, 2018.
Justin Sullivan | Getty Images

Oracle shares moved 3% lower in extended trading on Thursday after the company reported fiscal second-quarter revenue that fell short of analysts' estimates. On a conference call following the earnings release Chairman Larry Ellison made it clear that the company would not be hiring a second CEO to work alongside Safra Catz following the death of Mark Hurd.  

Here's how the company did:

  • Earnings: Excluding certain items, 90 cents per share, vs. 88 cents per share as expected by analysts, according to Refinitiv.
  • Revenue: $9.61 billion, vs. $9.65 billion as expected by analysts, according to Refinitiv.

Revenue grew about 0.5% on an annualized basis in the second quarter of Oracle's 2020 fiscal year, which ended on November 30, according to a statement.

Revenue from Oracle's largest business segment, Cloud Services and License Support, came in at $6.81 billion, up 3% year over year and slightly less than the $6.82 billion consensus estimate among analysts polled by FactSet.

The Cloud License and On-Premise License business segment contributed $1.13 billion in revenue, 7% lower and below the $1.17 billion FactSet consensus estimate.

Hardware revenue, at $871 million, declined 2% but was ahead of the $846.5 million estimate. Services revenue was down 1% at $806 million, which is about what analysts had expected.

In the quarter Oracle co-CEO Hurd died at age 62, and on the call Ellison, Oracle's founder and technology chief, addressed the investor interest in what Oracle would do to fill the gap in the leadership roster.

"We have no plans for having a second CEO," he said. 

Ellison said that Oracle will be bringing on people who are potential CEOs, but he and Catz won't be retiring anytime soon. 

Before Oracle named Catz and Hurd as dual CEOs in 2014, it had had just one CEO: Ellison. People thought it was "a bit odd" to go to a two-CEO structure back then, Ellison said. 

Also in the quarter Oracle announced the availability of Autonomous Linux for easier management and the acquisition of customer-loyalty company CrowdTwist.

"Many of SAP's largest customers are already working with us to develop plans to migrate to Fusion ERP," Ellison said. "SAP's customer base is up for grabs."

Oracle's CEO, Safra Catz, said she expects Oracle to report 95 cents to 97 cents in earnings per share, excluding certain items, in the fiscal third quarter. Analysts polled by Refinitiv had expected 97 cents in earnings per share, excluding certain items.

For the full 2020 fiscal year Catz reiterated that Oracle would grow revenue faster than the prior fiscal year in constant currency, with double-digit earnings growth. 

"After weaker 1Q results (+1.6% in constant currency), the company needs to pick up the pace for the remainder of the year," Wedbush analysts Steve Koenig and Ahmad Khalil wrote in a note distributed to clients on Tuesday. The analysts have a neutral rating on Oracle stock, saying that they're waiting for signs of improvement in the company's core database business.

Oracle shares have risen about 25% since the beginning of 2019.

WATCH: Mark Hurd, co-CEO of Oracle, dies at 62

Mark Hurd, co-CEO of Oracle, dies at 62
Mark Hurd, co-CEO of Oracle, dies at 62