Oracle ORCL reported non-GAAP earnings for the third quarter of fiscal 2022 of $1.13 per share, missing Zacks’ consensus estimate of 3.42%. Net income was down 3% from prior year quarter levels (up 1% at constant currency or cc).
Management had guided the growth rate of non-GAAP earnings per share on an annual basis in the range of 2-6% in USD and cc and in the range of $1.19-$1.23 per share.
Revenue grew 4% (up 7% cc) year-over-year to $10.5 billion and topped the Zacks consensus estimate by 0.02%. Revenue performance was primarily driven by the strength of the cloud business.
For the third fiscal quarter, Oracle had forecast a growth rate in total revenue – on an annual basis – in the range of 3-5% in USD and 6-8% cc.
Oracle shares are down 6.9% over the past year against the 18.1% drop in the Zacks Computer – Software industry and the 31.4% drop in the software sector. computer and technology.
Oracle Corporation Price, Consensus, and EPS Surprise
Oracle Corporation price-consensus-eps-surprise-chart | Quote from Oracle Corporation
Revenue per offers
Oracle Cloud Services and License Support Revenue (73% of total revenue) in the reported quarter increased 5% year over year (up 8% at cc) to $7.637 billion. The advantage can be attributed to the continued strength of Fusion, Autonomous Database and Oracle Cloud Infrastructure (OCI) services.
Management noted that the company’s total cloud revenue on an annualized basis was $11.2 billion and grew 26%.
Cloud Services and License Support Revenue Breakdown
Applications revenue (contributing 40.7% of total cloud services and license support revenue) was $3.187 billion, up 8% year-over-year (up 10 % at cc).
Infrastructure revenue (58.4% of total cloud services and license support revenue) was $4.450 billion, up 3% year-over-year (up of 7% at constant exchange rates).
Revenue from cloud licenses and on-premises licenses (12% of total revenue) increased 1% year over year (up 4% at cc) to $1.289 billion.
Hardware revenue (8% of total revenue) were $798 million, down 3% (up 1% at cc) year-over-year.
Service revenue (7% of total revenue) increased 7% (up 11% cc) to $789 million.
Revenue by geography
Revenue from the Americas (representing 55.6% of total revenue) increased 7.8% year-over-year to $5.849 billion.
Revenue from Europe/Middle East/Africa (28.7%) increased 1.1% from the prior year quarter to $3.014 billion.
Asia-Pacific revenue (15.7%) was down 1.8% from the year-ago quarter level at $1.650 billion.
Customer expansion remains remarkable
Management noted that the back-office mission-critical cloud applications business grew 29% and the back-office mission-critical cloud applications business now generates $5.1 billion in annualized revenue. Management noted that Fusion ERP, Fusion HCM and NetSuite ERP revenues increased by 35%, 22% and 29% respectively.
Consumer revenue from OCI services, which includes Autonomous Database, soared 93% at cc. Consumption revenue for cloud customers grew 43% year-over-year.
Database subscription revenue (including database support and database cloud services) increased 4% to cc.
Additionally, the company is seeing strong growth in Cloud HCM, which is increasingly being purchased as part of the company’s cloud ERP application suite. Additionally, the migration of several large-scale SAP customers to the Fusion ERP and Fusion HCM cloud remains a tailwind.
The expansion of the customer base allows the company to maintain its leading position in the cloud ERP market. Management is optimistic about the latest Oracle Fusion Cloud ERP, HCM and EPM applications. The company has won Fusion Cloud ERP deals from companies such as Johnson & Johnson, Trevi Group, Haemonetics, YesStyle.com, Saskatchewan Health Authority, Entegris Health, TD Bank, Bharti Airtel, Silicon Valley Bank and Société Générale in France.
The company’s HCM and ERP client base also includes Morgan Chase, Santander, Bank New York Mellon, HSBC, Lloyds, Macquarie, Credit Suisse, UBS, Credit Agricole and many more.
The next-generation autonomous database launched by Oracle, supported by ML, is seeing steady traction. The introduction of new products, including new OCI managed services, is expected to drive growth in this category. Autonomous database in Gen2 public cloud infrastructure is seeing healthy adoption.
Oracle’s latest Exadata [email protected] service offering is gaining traction with on-premises customers. Latest wins include Deutsche Bank, City of Atlanta and Kansas State
Other notable contracts won by OCI during the quarter include Wipro Limited, Red Bull Racing Honda, Siemens, Toyota, Institut National d’Assurance Maladie au Togo (INAM) and Cognizant.
Total non-GAAP operating expenses increased 8% year over year (up 10% at cc) to $5.699 billion. As a percentage of non-GAAP revenue, the figure contracted 164 basis points (bps) to 54.21% from year-ago quarter levels.
Non-GAAP operating income in the reported quarter was $4.814 billion, up 1% year-over-year (up 4% at cc).
The non-GAAP operating margin was virtually unchanged year-over-year at 46%.
Balance sheet and cash flow
As of February 28, 2022, Oracle had cash and cash equivalents and marketable securities of $23.39 billion, compared to $22.84 billion as of November 30, 2021.
Cash flow from operations and free cash flow for the last 12 months ended February 28, 2022 were $10.396 billion and $6.591 billion, respectively.
Share buybacks and dividends
Oracle repurchased 7 million shares worth about $600 million during the third fiscal quarter as it reduced the repurchase ahead of the purchase of Cerner Company CERN
In December, Oracle and Cerner jointly announced an agreement for Oracle to acquire Cerner in an all-cash transaction for $28.3 billion or $95 per share. The acquisition, Oracle’s largest ever, is expected to strengthen the company’s position in the lucrative healthcare space.
On March 10, 2022, the company declared a quarterly dividend of 32 cents per share payable January 19, 2022 to shareholders beginning April 21, 2022.
For the fourth quarter of fiscal 2022, Oracle expects total revenue growth on an annual basis in the range of 3-5% in USD and 6-8% cc. Zacks’ consensus estimate for revenue is pegged at $11.70 billion, indicating a 4.25% year-over-year increase.
Cloud services and license support revenue is expected to grow 4-6% in USD and 6-8% cc for the current quarter.
Oracle expects non-GAAP earnings per share (EPS) growth rate on an annual basis in the range of 2-6% cc and in the range of $1.40-$1.44 per share. Non-GAAP EPS for the fourth quarter is expected in the range of $1.14 to $1.18 per share at cc.
Zacks consensus estimate for the same is pegged at $1.35 per share.
Zacks Ranking and Stocks to Consider
Currently, Oracle carries a Zacks Rank #2 (Buy).
Some other top ranked stocks in the Zacks Computer and Technology sector are Advanced micro-systems AMD, carrying a Zacks Rank #1 (Strong Buy), and Apple AAPL, wearing a Zacks rank #2. You can see the full list of today’s Zacks #1 Rank stocks here.
Shares of Advanced Micro Devices are up 31.1% in the past year against industry Zacks Electronics – Semiconductors’ return of 12.8% and computer and computer sector’s decline of 0.6%. technology.
Apple shares have returned 30% over the past year compared to the industry Zacks Computer – Minicomputers rising 34.1% and the IT & Technology sector falling 0.6% over the past year. the last year. The company’s long-term earnings growth rate is currently projected at 12.50%.
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