Shares of Oracle Corp. (NYSE: ORCL- $42.93) are lower by about 3.3% despite a revenue and earnings beat for the company’s fourth quarter, as guidance came in below expectations. Revenue was up 7% to $11.3 billion compared last year and earnings per share, on an adjusted basis, was up 11% to $0.99 and five cents ahead of analysts’ views. Wall Street also anticipated revenue of just $11.19 billion. Cloud services and license support revenues were up 8% to $6.8 billion, while cloud license and on-premises license revenues were down 5% to $2.5 billion. The company also said that is will be changing its revenue reporting. Under Oracle’s old revenue-reporting model, total cloud revenue would have been $1.7 billion, implying a stronger-than-expected 25% increase from the year-ago period. With the new system, in which cloud revenue is part of a broader group called cloud services and licensing support, Oracle reported an 8% revenue increase from the year earlier. The company also tempered its fiscal first quarter guidance with exchange rates moving from a 3% revenue tailwind to now being a 1% headwind, estimating the four percentage-point move would lower revenue by about $300 million and profit by 3 cents a share.
I continue to believe that Oracle is positioned well to prosper. True, growth in cloud-based applications seems set to moderate from the extreme values previously recorded, but advancement should still be quite attractive. Also, profitability in Software-as-a-Service applications should markedly improve as little incremental investment is required for growth. Meanwhile, Oracle stock’s current valuation suggests that patient investors may find interest in these high-quality shares.