Oracle Falls After Sales Miss Estimates on Cloud App Growth
(Bloomberg) -- Oracle Corp. declined after reporting sales that fell short of analysts’ estimates, with demand for a key cloud-software product slowing from the previous quarter.
The world’s second-largest software maker said revenue rose 3.8% to $9.73 billion in the fiscal first quarter. Analysts polled by Bloomberg projected $9.77 billion, on average. Profit, excluding some items, was $1.03 a share, the Austin, Texas-based company said Monday in a statement. Analysts estimated 97 cents a share.
Executive Chairman Larry Ellison and Chief Executive Officer Safra Catz have been investing in services to run users’ applications and store their data in the cloud after initially deriding the space. Still, some customers are holding off shifting critical Oracle databases to the cloud and may opt for market leader Amazon.com Inc. or Microsoft Corp. when they do move, Bloomberg Intelligence Analyst Anurag Rana said in a note before results were released.
“It continues to be a bit of an uphill battle for Oracle battling Microsoft and Amazon in this cloud arms race,” said Dan Ives, an analyst at Wedbush Securities.
Catz said revenue in the current period will gain 3% to 5% from a year earlier, meeting the average projection of $10.2 billion, or a 4% year-over-year increase. Profit will be $1.09 to $1.13 a share. Analysts, on average, estimated $1.09.
In the fiscal first quarter, revenue from cloud services and license support increased 6% to $7.37 billion, falling just short of analysts’ estimates of $7.4 billion. That metric includes sales from hosting customers’ data in the cloud, but a large portion is generated by maintenance fees for traditional software kept on clients’ corporate servers.
Cloud license and on-premise license sales dropped 8% to $813 million in the period ended Aug. 31. Analysts had expected $865 million.
Oracle said sales of its Fusion application for managing corporate finances rose 32% in the period -- compared with 46% growth reported in the fiscal fourth quarter. Revenue from NetSuite’s financial software, targeted to small- and mid-sized businesses, rose 28%, after a 26% gain in the previous period.
The results marked the fifth straight quarter of year-over-year revenue growth after two consecutive fiscal years of declining sales.
Shares, which fell as much as 3.7% after the earnings report, trimmed some of the loss when the forecast was announced. The stock, which closed at $88.89 in New York, hit an all-time high in August as investors cheered progress in the company’s cloud efforts and has gained 37% this year, about double the increase in the S&P 500 Index.
(Updates with forecast in the fifth paragraph.)
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