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What You Need to Know About Oracle's 3rd-Quarter Earnings

- By Mayank Marwah

Oracle Corp. (ORCL) released better-than-expected third-quarter results before the opening bell on March 14, driven by strength in the cloud service division and licence support unit. However, the company issued a disappointing fourth-quarter outlook.

By the numbers

Oracle's net income came in at $2.7 billion, or 76 cents per share, as compared with a loss of $4.05 billion, or 98 cents per share, in the prior-year quarter. Adjusted earnings stood at 87 cents per share. Quarterly revenue was $9.61 billion, down a mere 0.72% year over year.

Total cloud services and license support sales made up approximately 70% of total quarterly revenue at $6.66 billion, up 4% in constant currency. Cloud license and on-premise license revenue declined 4% to $1.25 billion.

Non-GAAP operating income grew 2% to $4.8 billion, while the non-GAAP operating margin surged 100 basis points to 44%.

Oracle's push into cloud computing

The company is hoping to gain a leadership position in the cloud computing market, which is currently dominated by Amazon.com Inc. (AMZN), Microsoft Corp. (MSFT) and Salesforce.com Inc. (CRM), by adding more cloud versions of its database products to its portfolio.

It is also attempting to persuade its existing customers to shift to cloud-based systems from the expensive on-premise model.

Some of its clients are benefitting from Oracle's Bring Your Own License (BYOL) program, which it rolled out in the first quarter. The program permits customers to shift their existing on-premise licenses to the Oracle Cloud.

Financial forecast

The company guided for fourth-quarter revenue to remain flat or decline 2%. Non-GAAP earnings are projected to fall between $1.05 and $1.09 per share.

In a statement, CEO Safra Catz commented on Oracle's outlook.

"I expect the strengthening U.S. dollar will continue with a currency headwind of 3% for fourth-quarter revenue and a three-cent headwind to earnings per share," he said.

Disclosure: I do not hold any positions in the stocks mentioned.

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This article first appeared on GuruFocus.