Oracle beats on top and bottom lines as cloud revenue jumps

Key Points
  • Oracle's top and bottom lines for the May quarter surpassed expectations, and its quarterly revenue guidance exceeded estimates.
  • During the quarter, some of the company's cloud services received approval for use at U.S. defense and intelligence agencies.

In this article

Larry Ellison, Oracle's chairman and technology chief, speaks at the Oracle OpenWorld conference in San Francisco on September 16, 2019.
Justin Sullivan | Getty Images

Oracle shares climbed as much as 5% in extended trading on Monday after the software vendor announced fiscal fourth-quarter results and quarterly revenue guidance that exceeded Wall Street's expectations.

Here's how the company did:

  • Earnings: $1.67 per share, adjusted, vs. $1.58 per share as expected by analysts, according to Refinitiv.
  • Revenue: $13.84 billion, vs. $13.74 billion as expected by analysts, according to Refinitiv.

Oracle's revenue grew 17% year over year in the quarter that ended on May 31, according to a statement. Net income reached $3.32 billion, or $1.19 per share, compared with $3.19 billion, or $1.16 per share, in the year-ago quarter.

CEO Safra Catz said on a conference call that she expects fiscal first-quarter adjusted earnings of $1.12 to $1.16 per share and 8% to 10% revenue growth. Analysts polled by Refinitiv had expected $1.14 in adjusted earnings per share on $12.34 billion in revenue, which implies 7.8% growth.

The company's top source of revenue, cloud services and license support, jumped 23% to $9.37 billion. But revenue from cloud licenses and on-premises declined 15% to $2.15 billion.

Revenue from cloud infrastructure totaled $1.4 billion, which was up 76%, accelerating from 55% growth in the prior quarter. That part of Oracle is expanding faster than Microsoft and Google but it's still much smaller than that of their rivals. Oracle's gross margin in the unit will continue to expand, Catz said on the call.

Larry Ellison, Oracle's chair and technology chief, said the company will introduce a generative artificial intelligence cloud service tied to a partnership with startup Cohere, which has agreed to using Oracle's cloud infrastructure. Microsoft, which has a partnership with startup OpenAI, offers the Azure OpenAI Service, allowing organizations to deploy large language models for taking human input and generating human-like responses.

"This new service protects the privacy of our enterprise customers' training data, enabling those customers to safely use their own private data to train their own private specialized large-language models," Ellison said. Oracle has started using the tool internally, he said.

During the quarter, Oracle said more of its cloud services had received approval for use by U.S. defense and intelligence agencies.

Excluding the after-hours move, Oracle shares have climbed almost 43% so far this year, while the S&P 500 index is up around 13%.

The stock rose 6% in regular trading, its best day in a year, after Wolfe Research analysts upgraded the stock to the equivalent of a buy from a hold based on improving financials along with the company's position in AI.

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