Oracle Beats Q1 EPS Estimates On Cloud Demand

Oracle Beats Q1 EPS Estimates On Cloud Demand
September 14, 2020

 

Information technology giant Oracle Corp (NYSE: ORCL) reported fiscal 2021 first-quarter earnings and revenues that beat analysts’ estimates. The company also issued a higher than expected second-quarter outlook. The stock closed almost flat at $57 on Friday. Since the beginning of 2020, the company’s shares have gained roughly 8%.

The Redwood City, California based company reported first-quarter revenues of $9.367 billion, up 2% from $9.218 billion in the similar period last year.

For the quarter ended August 31st, 2020, Oracle reported a net income of $2.251 billion, or $0.72 per share, an increase of 5% from $2.137 billion, or $0.63 a share, in the quarter ended August 31st, 2019.

Excluding stock-based compensation, amortization of intangible assets, and restructuring, Oracle posted 1Q 2020 non-GAAP net income of $2.882 billion, or $0.93 per share, compared with $2.763 billion, or $0.81 a share, in 1Q 2019. Analysts surveyed by Refinitiv had anticipated the company to report earnings of $0.86 per share on revenues of $9.19 billion for the reported period.

Oracle Chairman and CTO, Larry Ellison, explained how cloud computing played an important role in revenue growth.  Ellison said: “Q1 was fantastic with total revenue beating guidance by more than $150 million, and non-GAAP earnings per share beating guidance by $0.07. Our cloud applications businesses continued their rapid revenue growth with Fusion ERP up 33% and NetSuite ERP up 23%. We now have 7,300 Fusion ERP customers and 23,000 NetSuite ERP customers in the Oracle Cloud. Our infrastructure businesses are also growing rapidly as revenue from Zoom more than doubled from Q4 last year to Q1 in this year. I have a high level of confidence that our revenue will accelerate as we move on past COVID-19.”

Segment-wise,

  • Cloud services and license support revenues increased 2% y-o-y to $6.947 billion. Analysts surveyed by FactSet had anticipated the company to post revenues of $6.93 billion. During the quarter, the company received new cloud business from Xactly and McDonald’s.
  • On-premise and Cloud license revenues were $886 million, up 9% from last year. The reported figures were higher than the FactSet Consensus estimate of $749 million.
  • Hardware revenues were almost flat at $814 million.
  • Services revenues decreased 8% y-o-y to $720 million.

The company’s CEO, Safra Catz, clarified that the company’s operations were “only briefly interrupted” by the COVID-19 pandemic.

During the first quarter, the company started facilitating the relocation of cloud regions of data center hardware and services to clients’ data centers for a monthly charge. In August, President Trump had stated that Oracle could manage a portion of the social media (video sharing) app TikTok. The other leading contender for taking over TikTok’s US, Australia, Canada, and New Zealand operations from Chinese software firm ByteDance is Microsoft. Oracle’s CEO Catz had asked not to raise queries about TikTok.

Catz stated that she is extremely optimistic that Oracle’s revenue will speed up in the aftermath of the pandemic. In April, Oracle revealed that Zoom had chosen Oracle as its partner to widen its cloud services.

Moving forward, the company expects second-quarter non-GAAP earnings in the range of $0.98 per share to $1.02 per share, and revenue growth of between 1% and 3%. Analysts polled by Refinitive are forecasting non-GAAP earnings of $0.94 per share on revenues of $9.59 billion, implying practically no growth in revenues. The company refrained from issuing an FY 2021 outlook.

Furthermore, the board of directors agreed to a quarterly cash dividend of $0.24 per share, payable on October 22nd, 2020. The quarterly earnings beat and upbeat Q2 outlook are expected to trigger a new round of buying in the days ahead.

The historical price chart indicates that the stock is trading above a strong support level of 54. Additionally, the stock is trading above its 50-day moving average while the Chaikin money flow indicator has a positive reading. Therefore, we are anticipating the stock to rally further in the days ahead.

orcl - technical analysis - 14th September 2020

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Andrew Wright

Prior to founding tradersasset.com in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.


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