Why is Oracle (ORCL) up 1.2% since its last earnings report?

It’s been a month since Oracle’s (ORCL) last earnings report, with shares up about 1.2% in that time, underperforming the S&P 500.

Will the recent positive trend continue into the next earnings release, or is Oracle headed for a pullback? Before we dive into how investors and analysts have reacted recently, let’s take a quick look at the latest earnings report to better understand the important drivers.

Oracle’s Q4 earnings miss estimates, revenues grow YoY

Oracle reported fourth-quarter fiscal 2024 non-GAAP earnings of $1.63 per share, missing the Zacks Consensus Estimate by 1.83% and falling 2.4% year over year. At constant currency (cc), earnings declined 1% year over year.

Revenues rose 3.3% (up 4% yoy) year over year to $14.28 billion, but missed the Zacks Consensus Estimate by 0.61%.

The new offering, Oracle Database@Google Cloud, will be available in the second half of the year and will offer the highest levels of Oracle database and network performance, as well as the same features and pricing as Oracle Cloud Infrastructure (“OCI”).

Revenue from the Americas increased 4.3% year over year to $8.94 billion and accounted for 62.6% of total revenue. Europe/Middle East/Africa increased 2.4% year over year to $3.53 billion and accounted for 24.8% of total revenue. The remaining revenue came from Asia Pacific, which was flat year over year at $1.8 billion.

Details about the most important products

Cloud services and licensing support revenue increased 9% year over year (10% cc) to $10.23 billion, driven by strategic cloud applications, autonomous databases and OCI.

Cloud and on-premises license revenue declined 15% year over year (down 14% cc) to $1.83 billion.

Cloud services revenue (IaaS plus SaaS), including Cerner, was $5.3 billion, up 20% year-over-year and cc.

Cloud infrastructure (IaaS) revenue was $2 billion, up 42% year-over-year and cc.

Cloud applications (SaaS) revenue was $3.3 billion, up 10% year-over-year and cc.

Fusion Cloud ERP (SaaS) revenue was $0.8 billion, up 14% year-over-year and in the cc. NetSuite Cloud ERP (SaaS) revenue was $0.8 billion, up 19% year-over-year and in the cc.

Hardware revenue was $842 million, down 1% year over year (flat in cc). Services revenue fell 6% (down 6% in cc) to $1.37 billion.

Application subscription revenue, which includes product support, was $4.6 billion, up 6% year over year. The company’s strategic back-office SaaS applications now have annual revenue of $7.7 billion, up 16%.

Infrastructure subscription revenue, which includes licensing support, was $5.6 billion, up 13%. Cloud infrastructure services revenue increased 42%. Excluding legacy hosting, OCI Gen2 cloud infrastructure services grew 44%, with annual revenue of $7.4 billion.

Database subscription revenue, which includes database licensing, grew 6% to $2 billion annually. The largest increase came from cloud database services, which grew 26%.

Operational details

Total non-GAAP operating expenses decreased 1% year over year (down 1% cc) to $7.61 billion.

Non-GAAP operating income was $6.66 billion, up 8% year over year (up 9% in cc). Non-GAAP operating margin was 47%, up 235 basis points year over year.

Balance sheet and cash flow

As of May 31, 2024, Oracle had cash, cash equivalents and marketable securities of $10.6 billion, compared to $9.9 billion at February 29, 2024.

Cash flow from operating activities and free cash flow were $18.67 billion and $11.8 billion, respectively.

The company’s remaining work obligations (RPOs) totaled more than $98 billion, up 44% in constant currency, with the portion excluding Cerner increasing 60%.

It is expected that approximately 39% of total RPO will be recognized as revenue over the next 12 months.

The company purchased 1.25 million shares for a total of $150 million. The board of directors declared a quarterly cash dividend of 40 cents per common share outstanding. This dividend will be paid to shareholders of record at the end of the business day on July 11, 2024, with a payment date of July 25, 2024.

Conductivity

In the first quarter of fiscal 2025, total revenue is expected to increase from 6% to 8% in cc and, given the current currency environment, is expected to increase from 5% to 7% in USD. If exchange rates remain the same as currently, currency is expected to have a negative impact on revenue of 1% and either 1 cent or 2 cents negative impact on EPS in the first quarter of fiscal.

Total Cloud revenue is expected to grow 21% to 23% in cc and from 20% to 22% in USD. Non-GAAP EPS is expected to grow 11% to 15% and in a range of $1.33-1.37 in cc. Non-GAAP EPS is expected to grow 10% to 14% and in a range of $1.31-1.35.

The company expects cloud infrastructure services to grow faster than the 50% growth seen in fiscal 2025. Capital expenditures are expected to double compared to fiscal 2024.

How have estimates changed since then?

It turns out that over the past month, estimates have shown an upward trend.

VGM Results

At the moment, Oracle has an average Growth Score of C, a grade with the same rating on the momentum front. Along those same lines, the stock has a grade of C on the Value side, which puts it in the middle 20% for this investment strategy.

Overall, the stock has a Composite VGM Score of C. If you’re not focused on a single strategy, this rating should interest you.

Perspectives

The stock’s estimates are trending upwards, and the magnitude of these revisions is zero. Interestingly, Oracle has a Zacks Rank #3 (Hold). We expect a consistent return for the stock over the next few months.

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