October 1, 2022

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Oracle misses on profit expectations as equity investments hurt income

3 min read

Oracle Corp. posted its third quarter financial results today, reporting revenue in-line with forecasts and a profit that missed expectations due to what it said was the decline in the value of two equity investments. However, its profit and revenue guidance for the next three months was higher.

The report initially sent Oracle’s stock down more than 6% in after-hours trading, only for it to recover once the forecast emerged.

The database company reported earnings before certain costs such as stock compensation of $ 1.13 per share on revenue of $ 10.51 billion, up 4% from a year ago. Analysts had been expecting a bigger profit of $ 1.18 per share on the same revenue.

Oracle’s net income for the period fell 54% to $ 2.32 billion. The company said this was due to the declining stock value of gene-sequencing company Oxford Nanopore Technologies Plc., And an operating loss at the privately-held Arm server chip maker Ampere Computing LLC.

Even so, Oracle said “we remain confident that our investments in these two cutting-edge technology companies will deliver very strong returns for Oracle.”

Oracle Chief Executive Safra Catz (pictured) pointed out that the 7% constant currency revenue growth delivered in the quarter was the company’s highest quarterly organic revenue growth rate since it began its transition to the cloud.

“This strong top line growth has been coupled with a solid non-GAAP constant currency operating profit growth of 4%, but the big story is that our overall revenue growth is being driven by both our rapidly growing Cloud Infrastructure and Cloud Applications businesses,” Catz said in a statement.

Oracle reported that its cloud computing software revenue, which comprises its Infrastructure-as-a-Service and Software-as-a-Service businesses, jumped 24% to $ 2.8 billion in the quarter.

“Q3 Cloud Infrastructure revenue was up 47% in constant currency,” Catz continued in her statement. Q3 Cloud Applications growth was led by Fusion ERP, which was up 35% in constant currency and NetSuite ERP which was up 29% in constant currency. Total Cloud revenue which includes Cloud Infrastructure and Cloud Applications is now over $ 11 billion a year. ”

Oracle also pointed to some rapid customer gains in its Fusion ERP and NetSuite ERP software offerings, which increased by 33% and 27%, respectively.

In a conference call with analysts, Catz said Oracle was still struggling with supply chain problems. Despite its transition to the cloud, the company still sells a lot of hardware to enterprise customers that want to deploy its database services in on-premises data centers.

“We couldn’t meet every need as quickly as we would have liked it,” Catz told analysts on the call.

During the quarter, Oracle completed development work on the multicloud version of its MySQL HeatWave open-source database. Oracle Chairman and Chief Technology Officer Larry Ellison said this offering is designed to compete with Amazon Web Services Inc.’s MySQL database, Aurora, as well as Snowflake and other popular cloud databases. He promised it will perform seven-times faster than those rival offerings at around two-to-five times lower cost.

“In a few weeks, MySQL HeatWave will also be available in the Amazon Cloud and the Microsoft Azure Cloud,” Ellison said. “What customer and database analysts are saying about Oracle’s new MySQL HeatWave database is simply astonishing.”

In addition to MySQL HeatWave, Oracle customers will soon have new capabilities to look forward too as a result of its $ 28.3 billion acquisition of electronic medical records firm Cerner Corp.

That acquisition is expected to close sometime during the current quarter, after which Oracle said it will integrate its voice digital assistant tools with Cerner’s software to help medical professionals access patient data faster and more easily.

At the time, Ellison said the idea is to provide a new generation of easier-to-use digital tools for medical professionals, enabling them to access the information they need through a hands-free voice interface.

Oracle said there’s a great opportunity to help healthcare organizations operate more efficiently and thereby improve patient care.

For its fiscal fourth quarter, Oracle said it anticipates earnings of $ 1.35 to $ 1.39 per share, with revenue of between $ 11.9 billion and $ 12.13 billion. Analysts had earlier forecast earnings of $ 1.38 per share on $ 11.76 billion in revenue. Catz said the guidance does not assume any contribution from Cerner, though the deal will likely close before the quarter ends.

Photo: Oracle / Flickr

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