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Factors Setting the Tone for Oracle's (ORCL) Q3 Earnings

Zacks Equity Research

Oracle ORCL is slated to release third-quarter fiscal 2020 results on Mar 12.

For the fiscal third quarter, the company expects non-GAAP revenues to rise in the range of 1-3%, both at U.S. Dollar (USD) and constant currency (cc).

The Zacks Consensus Estimate for revenues for the fiscal third quarter is pegged at $9.77 billion, indicating an improvement of 1.5% from the year-ago quarter.

Oracle expects non-GAAP earnings per share to be 96-98 cents in cc (and 95-97 cents excluding currency impact).

The Zacks Consensus Estimate for earnings has been pegged at 96 cents over the past 30 days, suggesting growth of 10.3% from the year-ago reported figure.

Notably, the company surpassed the Zacks Consensus Estimate in the trailing three quarters, matching the same once, the average positive surprise being 3.6%.

Let’s see how things have shaped up for the upcoming announcement.

Oracle Corporation Price and EPS Surprise

Oracle Corporation Price and EPS Surprise

Oracle Corporation price-eps-surprise | Oracle Corporation Quote

Factors to Consider

Oracle’s fiscal third-quarter top line is anticipated to have benefited from continued momentum in the next-generation autonomous database, supported by ML and AI. Notably, in the fiscal second quarter, Oracle added around 2000 new Autonomous Database cloud customers.

Additionally, robust adoption of Oracle Data Cloud services, which offers marketers the required data and tools to strengthen their end-to-end marketing processes, is likely to have contributed to the fiscal third-quarter top line.

Moreover, synergies from other acquisitions comprising Grapeshot, Moat, Crosswise, AddThis, BlueKai, and Datalogix, have been strengthening Oracle Data Cloud platform.

Meanwhile, momentum in cloud-based Fusion ERP, NetSuite and HCM applications is expected to have continued in the fiscal third quarter. Notably, NetSuite ERP and Fusion ERP businesses were up 29% and 37% year over year in the fiscal second quarter, respectively.

Additionally, Oracle announced that its Cloud Applications were live in the Gen 2 cloud region in Mumbai, India. As a result, the company’s Cloud Application could be leveraged by existing and new customers. The move reflects continued momentum for Oracle’s cloud business in India.

Moreover, increasing adoption of Oracle’s HCM cloud by organizations, as a part of an ERP cloud application suite has been a growth driver. According to a report by Dataquest, Extreme Networks partnered with Tata Consultancy Services TCS for the deployment of Oracle HCM Cloud in the to-be reported quarter.

However, increasing expenses on product development, by means of new hiring, product roll outs and partnerships, and acquisitions, are expected to have weighed on margins in the fiscal third quarter.

Key Expectations

The Zacks Consensus Estimate for total hardware revenues in fiscal third quarter is pegged at $876 million, indicating an increase from $871 million reported in the fiscal second quarter. Meanwhile, the consensus mark for Services revenues is pegged at $776 million, indicating a decline from $806 million reported in the fiscal second quarter.

Moreover, the consensus mark for Cloud services and license support revenues is pegged at $6.9 billion. It had reported Cloud services and license support revenues of $6.8 billion reported in the fiscal second quarter. Further, the consensus mark for cloud license and on-premise license revenues is pegged at $1.19 billion, indicating an increase from $1.12 billion reported in the fiscal second quarter.

Developments in Q3

Notably, Oracle Cloud Applications achieved FedRAMP Moderate Authorization in the to-be reported quarter. With this new authorization, U.S. Federal Government customers are expected to benefit from Oracle’s suite of cloud applications covering ERP, HCM, and CX for finance, human resources, supply chain, and customer experience.

Moreover, Oracle rolled out Oracle Cloud Data Science Platform, to aid enterprises to devise, train, manage and deploy machine learning models, to boost data science projects.

Meanwhile, Oracle announced continued expansion of its cloud interoperability partnership with Microsoft MSFT to help joint customers worldwide run their mission-critical workloads across Oracle Cloud and Microsoft Azure. Enterprises can now build workloads that seamlessly interoperate between Microsoft and Oracle cloud regions in Canada.

Further, Oracle announced enhancements to its Oracle Enterprise Manager platform for enabling customers to easily shift Oracle Databases to the cloud, as well as simplify management of hybrid cloud environments.

The company is making every effort to enhance functionalities of cloud-based applications, which is expected to have bolstered adoption, consequently favoring the top line. These initiatives are also expected to provide the company a competitive edge in the Database-as-a-Service market against Amazon’s AMZN Amazon Web Services.

Notably, Oracle Cloud Applications was chosen by Blue Nile — a leading online diamond jeweler. By utilizing Oracle’s cloud solutions, Blue Nile will able to streamline financial operations, alongside boosting customer’s shopping experience.

Zacks Rank

Currently, Oracle carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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