Oracle Corp (NYSE: ORCL) reported a swing to a loss in the second quarter of fiscal 2022, compared with a net profit in the similar period last year. However, on a non-GAAP basis, the company reported a second-quarter profit that was higher than the previous year. In addition to beating earnings and revenues estimates of analysts, the tech company also issued a robust Q3 view.
Following the results, the stock of Oracle gained 15.61% or $13.86 to end Friday’s trading session at $102.63. The shares also hit a new 52-week high of 106.34 during intra-day trading. The surge enabled Oracle’s co-founder Larry Ellison to become richer than Google’s co-founders (Sergey Brin and Larry Page).
The Austin, Texas-based company reported second-quarter revenues of $10.360 billion, an increase of 6% from $9.800 billion in the comparable quarter last year. Analysts surveyed by Refinitiv had anticipated the company to post revenues of $10.21 billion. Additionally, the second-quarter revenue growth was also higher than the 3% to 5% growth forecast by Oracle. Notably, it is the best quarterly growth reported by the company since 2018.
For the quarter ending November 30, 2021, Oracle posted a net loss of $1.247 billion, or $0.46 per share, compared with a net profit of $2.442 billion, or $0.80 a share, in the quarter ending November 30, 2020.
The primary reason for the loss is a payment related to a judgment over a decade-old issue around hiring former (and late) CEO Mark Hurd.
Excluding stock-based compensation, amortization of intangible assets, acquisition-related expenses, and restructuring charges, among others, the Q2 2022 non-GAAP income was $3.380 billion, or $1.21 per share, compared with $3.235 billion, or $1.06 a share, in the Q2 2021. Analysts surveyed by Refinitiv had anticipated the company to post earnings of $1.11 a share for the reported quarter. Notably, Oracle had issued profit guidance of between $1.09 and $1.13 per share.
Commenting on the results, Oracle CEO Safra Catz said, “These strong results are being driven by the 22% growth of our infrastructure and applications cloud businesses which are approaching $11 billion in annualized revenue.”
Segment-wise,
- Cloud services and license support revenues grew by 6% y-o-y to $7.554 billion, a notch above the $7.54 billion forecast by StreetAccount.
- Cloud license and on-premise license revenues were $1.237 billion, an increase of 13% from last year. The reported figure was higher than the StreetAccount consensus of $1.07 billion.
- Hardware revenues fell by 9% to $767 million in Q2 2022.
- Services revenues were $802 million, reflecting a growth of 8% from the previous year.
Oracle revealed that its short-term deferred revenue was $7.9 billion, which missed the $8.29 billion forecasts.
The company intends to open cloud data centers in Colombia, Singapore, France, Israel, Mexico, Italy, South Africa, and Sweden.
Safra Catz pointed out that the company recorded a 22% increase in its infrastructure and applications cloud business. Likewise, Fusion ERP, the enterprise-level financial software, posted a revenue growth of 35%. Also, NetSuite ERP, which caters to the need of small clients, increased by 29%. Fusion HCM, the HR software, registered a growth of 25%. Overall, Oracle Cloud Infrastructure consumption revenue rose by 86%.
For the third quarter, the company forecasts revenue growth of between 3% and 5%. Furthermore, Catz projected Q3 2022 earnings to be in the range of $1.14 to $1.18 per share. During the current quarter, the CEO expects a currency headwind of 3% for revenue. Likewise, the currency headwind for earnings is projected to be $0.05 per share.
Oracle also revealed a fresh $10 billion stock repurchase program. During the second quarter, the company purchased shares worth $7 billion. The CEO pointed out that the company had repurchased almost 47% of its shares at 50% (average) of the current price level.
The quarterly earnings beat and impressive Q3 outlook are expected to keep the stock of Oracle range-bound with a slight bullish bias in the short term.
The historical price chart indicates that the stock of Oracle is moving along the ascending trend line, as shown in the image below. The stock is also trading above its 50-day moving average while the stochastics RSI is rising towards the bullish zone. Therefore, we are anticipating the stock to remain in an uptrend in the days ahead.
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