Oracle slides on revenue decline

Oracle shares fell as much as 5% in extended trading on Tuesday after the company reported fiscal fourth-quarter results that missed analysts’ revenue estimates. Revenue was down 6% from a year ago in the quarter, which ended on May 31, according to a statement.

Here’s how the company did: 

• Earnings: $1.20 per share, adjusted
• Revenue: $10.44 billion

The company had said in March that it was expecting roughly flat revenue in the quarter. Analysts surveyed by Refinitiv had expected $1.15 in adjusted earnings per share on $10.65 billion in revenue. Comparing the results with analysts’ estimates is not straightforward because the coronavirus impacted Oracle’s operations in the quarter.

Oracle’s largest category, cloud services and license support, delivered $6.85 billion in revenue, growing 1% on an annualized basis and just below the $6.90 billion consensus among analysts polled by FactSet. 

Revenue from cloud and on-premises licenses came to $1.96 billion, down 22% and less than the FactSet consensus of $2.14 billion.

“As the quarter progressed, we saw a dropoff in deals, especially in the industries most effected by the pandemic,” CEO Safra Catz told analysts on a conference call on Tuesday. “As countries begin reopening their economies, many of these discussions have already resumed. Since these were not lost to competitors, we believe that most of this business will ultimately be booked, and while some customers have deferred projects, we’re also rapidly building new pipelines with customers that are moving their on-premise workloads to the cloud.”

The pandemic caused some companies to reconsider their cloud operations, including viewing Oracle as an alternative to Amazon and Microsoft’s clouds, which have more market share than Oracle’s cloud, Catz said.

In the quarter Oracle announced new point-of-sale hardware for retailers and new cloud business from video communications companies Zoom and 8×8.

“8×8 was very surprised by the extent of their performance gains by moving out of AWS, moving part of their system out of AWS and into OCI [Oracle cloud infrastructure],” Larry Ellison, co-founder of Oracle and its chairman chief technology officer. “They were so surprised by the performance gains they achieved and the cost savings they achieved that they decided to move all of their services out of AWS and into Oracle.”

Catz called for 84 cents to 88 cents in adjusted earnings per share and a range of a 1% revenue to decline to 1% revenue growth in the fiscal first quarter. Analysts polled by Refinitiv had expected 85 cents in adjusted earnings per share and $9.09 billion in revenue, which implies a 1.4% year-over-year decline.

Catz declined to provide guidance for the 2021 fiscal year. She said she thought revenue growth would accelerate this year.

Bernstein Research’s Mark Moerdler and Firoz Valliji lowered their fiscal fourth-quarter estimates last week, partly to reflect potential fallout from the virus.

“4Q20 was expected to be a strong quarter, due to seasonally high mix of license revenue benefiting from autonomous database sales,” wrote Moerdler and Valliji, who have the equivalent of a buy rating on Oracle stock. “We are now more concerned about the license revenue, as transactional revenue is much more seriously impacted by economic disruption especially near-term as IT organizations have focused on work-from-home rather than major projects.”

Notwithstanding the after-hours move, Oracle shares are up about 3% for the year.

Correction: Oracle missed consensus top-line (revenue) expectations, but beat bottom-line (adjusted EPS) expectations. 

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