Conservative · Stocks to Consider and Updates

Oracle Beats Earning’s Estimates; Cloud Revenue Disappoints

Redwood City, California-based Oracle Corp. (NYSE: ORCL – $50.19) reported total second quarter revenues were up 6% to $9.62 billion compared to last year. Overall cloud revenue growth of 44% to $1.52 billion drove quarterly revenue and earnings higher, although slightly below where the Street was expecting at $1.56 billion. ORCL shares shed about 4% after hours on the report. Cloud SaaS Applications growth of 49% lead the way and Cloud plus On-Premise Software revenues were up 9% to $7.8 billion. Cloud Software as a Service (SaaS) revenues were up 55% to $1.1 billion and Cloud Platform as a Service (PaaS) plus Infrastructure as a Service (IaaS) revenues were up 21% to $396 million.  Even as Oracle shifts to the cloud, the majority of its sales come from software-license updates and product support. That segment generated $4.95 billion in revenue, a 3.7% jump from a year earlier and new licenses grew 0.5% to $1.35 billion. Adjusted net income was up 16% to $3.0 billion, equal to earnings per share of $0.70 compared to $0.61 last year and a consensus estimate of $0.68. The Board of Directors increased the authorization for share repurchases by $12 billion and maintained the quarterly cash dividend at $0.19 per share. 

       Oracle’s primary execution task is now to accelerate the conversion of its blue-chip customer base to the cloud. With a full set of cloud services, the company’s strong sustained cloud revenue growth rates along with margin expansion is moving ahead nicely, despite strong competition from Microsoft, Alphabet and Amazon Web Services, which are targeting the cloud infrastructure as a service market along with smaller players such as and Workday. In all, I continue to like Oracle for its reasonable valuation in a high-growth market, its growing dividend yielding 1.5% and strong balance sheet.


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