Oracle guidance misses expectations, stock drops
- Oracle called for less earnings guidance than analysts had expected as the company plans investments in cloud computing.
- For the quarter, though, Oracle beat on the top and bottom lines.
- Barclays analysts lowered their rating on the stock last month after it saw gains with investors shifting from growth to value.
Oracle shares fell 5% in extended trading on Tuesday after the company offered lower quarterly revenue guidance than expected as it plans to increase capital expenditures to support cloud computing workloads. The guidance came on Oracle's earnings call after the enterprise software maker issued better-than-expected earnings and faster revenue growth than last quarter.
Here's how the company did:
- Earnings: $1.54 per share, adjusted, vs. $1.31 per share as expected by analysts, according to Refinitiv.
- Revenue: $11.23 billion, vs. $11.04 billion as expected by analysts, according to Refinitiv.
With respect to guidance, Oracle CEO Safra Catz called for 94 cents to 98 cents in adjusted earnings per share and 3% to 5% revenue growth in the fiscal first quarter. Analysts polled by Refinitiv are expecting fiscal first-quarter adjusted earnings of $1.03 per share and the equivalent of 3% revenue growth.
"We expect to roughly double our cloud capex spend in FY 2022 to nearly $4 billion," Catz said. "We are confident that the increased return in the cloud business more than justifies this increased investment, and our margins will expand over time."
Revenue rose 8% year over year in Oracle's fiscal fourth quarter, which ended on May 31, according to a statement. In the prior quarter revenue grew 3%. The accelerating growth benefited from a comparison against the quarter last year when the coronavirus arrived in the U.S. and Oracle's revenue fell some 6%.
Oracle's top segment by revenue, cloud services and license support, generated $7.39 billion, which was up 8% and above the FactSet consensus estimate of $7.32 billion in revenue. The company said revenue from its second-generation cloud infrastructure doubled in the quarter, but it did not provide the figure in dollars.
The cloud license and on-premises license segment contributed $2.14 billion in revenue, up 9% and more than the $2.05 billion consensus.
The company's hardware revenue, at $882 million, was exactly in line with analysts' estimates, declining 2%.
During the quarter Oracle announced new public-cloud computing options that draw on Arm-based chips, and the U.S. Supreme Court ruled on a longstanding case between Oracle and Google, declaring that Google's copying of Java code was fair use.
Notwithstanding the after-hours move, Oracle stock is up 26% since the start of the year, while the S&P 500 index is up 13% over the same period.
In May, Barclays analysts lowered their rating on the stock to the equivalent of hold from the equivalent of buy after the price had moved upward as investors rotated out of growth and into value. "To see further relative outperformance a growth acceleration at Oracle is needed, and we don't have enough tangible data points for this yet," the analysts wrote.
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