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Oracle (ORCL) Q4 Earnings Remain Unchanged Y/Y, Revenues Up

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Oracle ORCL reported fourth-quarter fiscal 2022 non-GAAP earnings of $1.54 per share. The Zacks Consensus Estimate for earnings was pegged at $1.17 per share. The bottom line remained unchanged year over year (up 7% at constant currency or cc).

Management had guided non-GAAP earnings per share (EPS) growth rate on a year-over-year basis in the range of 2-6% at cc and in the band of $1.40-$1.44 per share.

Revenues increased 5% (up 10% at cc) year over year to $11.84 billion and beat the Zacks Consensus Estimate by 1.67%. The top-line performance was mainly driven by strength in the cloud business.

For the fiscal fourth quarter, Oracle had anticipated total revenue growth rate on a year-over-year basis in the range of 3-5% at USD and at 6-8% cc.

Oracle shares are down 26.6% in the year-to-date period compared with the Zacks Computer – Software industry’s fall of 26.5% and the Computer and Technology sector’s decline of 29%.

Oracle Corporation Price, Consensus and EPS Surprise

Oracle Corporation Price, Consensus and EPS Surprise
Oracle Corporation Price, Consensus and EPS Surprise

Oracle Corporation price-consensus-eps-surprise-chart | Oracle Corporation Quote

Revenues by Offerings

Oracle’s Cloud services and license support revenues (64% of total revenues) in the reported quarter increased 3% year over year (up 7% at cc) to $7.61 billion. The upside can be attributed to continued strength in the Fusion, Autonomous Database and Oracle Cloud Infrastructure (“OCI”) services.

Break up of Cloud Services & License Support Revenues

Applications revenues (contributed 42.4% to total cloud services and license support revenues) amounted to $3.23 billion, up 6% year over year (up 9% at cc).

Infrastructure-related revenues (57.8% of total cloud services and license support revenues) were $4.37 billion, up 1% on a year-over-year basis (up 5% at cc).

Cloud license and on-premise license revenues (22% of total revenues) increased 18% year over year (up 25% at cc) to $2.53 billion.

Hardware revenues (7% of total revenues) were $856 million, down 3% (up 2% at cc) on a year-over-year basis.

Services revenues (7% of total revenues) rose 3% (up 7% at cc) to $833 million.

Revenues by Geography

Revenues from the Americas (representing 57.1% of total revenues) increased 11.5% year over year to $6.774 billion.

Revenues from Europe/Middle East/Africa (27.5%) declined 1.9% from the year-ago quarter figure to $3.26 billion.

Revenues from the Asia Pacific (15.4%) declined 1.1% from the year-ago quarter level to $1.8 billion.

Expanding Clientele Remains Noteworthy

Management noted that the strategic back-office cloud applications business increased 24% at cc and now has $5.4 billion in annualized revenues. Management noted that revenues from Fusion ERP and NetSuite ERP were up 23% and 30%, respectively.

Consumption revenues for OCI services, which include Autonomous Database, soared 83% at cc. Cloud customer consumption revenues increased 108% year over year.

Additionally, the company is witnessing strong growth in Cloud HCM, which is increasingly being purchased as part of the company’s ERP cloud application suite. Further, the migration of several large-scale SAP customers to Fusion ERP cloud and Fusion HCM remains a tailwind.

Expanding clientele is enabling the company to maintain its leading position in the cloud ERP market. Management is optimistic regarding the latest Oracle Fusion Cloud ERP, HCM and EPM applications.

The company won Fusion Cloud ERP deals from companies, including PNC Financial Services Group, BDO, Qube Holdings, Automatic Systems, Inc., Bukhatir Group and Solar Edge among others.

The company’s HCM and ERP clientele base also includes Morgan Chase, Santander, Bank New York Mellon, HSBC, Lloyds, Macquarie, Credit Suisse, UBS, Credit Agricole and many others.

The next-generation autonomous database launched by Oracle, supported by ML, is witnessing steady traction. New product introductions, including new OCI managed services, are likely to boost growth in this category. The autonomous database in Gen2 public cloud infrastructure is witnessing a healthy uptake.

Oracle’s latest Exadata Cloud@Customer service offering is gaining traction among on-premise customers. The latest wins include Deutsche Bank, City of Atlanta and State of Kansas.

Some noteworthy deal wins for OCI during the reported quarter are ABN AMRO, Generalli, Data Intensity and Informatica among others.

Operating Details

Non-GAAP total operating expenses increased 8% year over year (up 11% at cc) to $6.25 billion.

Non-GAAP operating income during the reported quarter was $5.59 billion, up 3% year over year (up 8% at cc).

Non-GAAP operating margin contracted 123 basis points (bps) on a year-over-year basis to 47%.

Balance Sheet & Cash Flow

As of May 31, 2022, Oracle had cash & cash equivalents and marketable securities of $21.8 billion compared with $23.39 billion as of Feb 28, 2022.

Operating cash flow and free cash flow for the trailing 12 months ended May 31, 2022, amounted to $9.53 billion and $5.02 billion, respectively.

Share Repurchases & Dividends

Oracle repurchased 8 million shares, worth approximately $600 million, during the fiscal fourth quarter.

In the fiscal fourth quarter, Oracle completed the acquisition of Cerner in an all-cash transaction amounting to $28.3 billion or $95 per share. The acquisition, the biggest ever for Oracle, is expected to bolster the company’s position in the lucrative healthcare domain.

The board of directors declared a quarterly cash dividend of $0.32 per share of outstanding common stock. This dividend will be paid to stockholders of record, after the close of business on Jul 12, 2022, with a payment date of Jul 26, 2022.

Q1 Guidance

For first-quarter fiscal 2023, Oracle anticipates total revenue growth rate, including Cerner, on a year-over-year basis, in the range of 17-19% at USD and at 20-22% cc.

Total cloud, excluding Cerner, is expected to grow from 25% to 28% in constant currency and from 22% to 25% in USD.

Non-GAAP EPS is expected to grow between 6% to 10% to be between $1.09 and $1.13 in constant currency. Non-GAAP EPS is expected to grow between 1% to 5% and be between $1.04 and $1.08 in USD.

Zacks Rank & Stocks to Consider

At present, Oracle carries a Zacks Rank #3 (Hold).

Some top-ranked stocks from the Zacks Computer and Technology sector are Axcelis Technologies ACLS, Baidu BIDU and Analog Devices ADI. While Axcelis and Baidu each sport a Zacks Rank #1 (Strong Buy), Analog Devices carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Axcelis’ second-quarter fiscal 2022 earnings has been revised 3 cents northward to 99 cents per share over the past 60 days. For 2022, earnings estimates have moved 10.3% north to $4.40 per share in the past 60 days.

Axcelis' earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 23.5%. Shares of ACLS have soared 38.6% in the past year.

The Zacks Consensus Estimate for Baidu’s second-quarter 2022 earnings has been revised 31 cents southward to $1.38 per share over the past 30 days. For 2022, earnings estimates have moved 3 cents north to $8.27 per share in the past 30 days.

Baidu's earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 52.9%. Shares of BIDU have dipped 24.7% in the past year.

The Zacks Consensus Estimate for Analog Devices' third-quarter fiscal 2022 earnings has been revised upward by 5 cents to $2.42 per share over the past 30 days. For fiscal 2022, earnings estimates have moved 16 cents north to $9.24 per share in the past 30 days.

Analog Devices' earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 7.7%. Shares of ADI have decreased 6.8% in the past year.


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