Oracle Misses Estimates; Cloud Business Soars

ORCL  Redwood City, California-based Oracle Corporation (NYSE: ORCL – $40.86) announced fiscal 2017 first quarter results with total revenues of $8.6 billion, up 2% in U.S. dollars and up 3% in constant currency, but a bit below consensus. Cloud plus On-Premise Software Revenues were $6.8 billion, up 5% in U.S. dollars and up 6% in constant currency on continued growth in its cloud-computing operations, which sell subscriptions to web-based, on-demand programs, data storage and other services. Cloud software as a service (SaaS) and platform as a service (PaaS) revenues were $798 million, up 77% in U.S. dollars and up 79% in constant currency. Total Cloud Revenues, including infrastructure as a service (IaaS), were $969 million, up 59% in U.S. dollars and up 61% in constant currency. Oracle’s conventional software business, which carries higher profit margins, continues to shrink. Revenue from new software licenses fell 11% to $1.03 billion in the quarter. For the quarter adjusted net income was $2.3 billion equal to $0.55 per share, up 4% from a year ago, but three cents below analysts’ estimates.

       The maker of business software continues to quickly build its rapidly growing cloud-computing business. My sense is the recent support for the shares reflects the company’s success and mounting presence in cloud services along with its pending acquisition of NetSuite. At its recent price, ORCL stock should still provide respectable risk-adjusted returns for patient investors. With about $56 billion in available cash on hand, it is just a matter of time before Oracle reaches for another acquisition.

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