Oracle Corporation (ORCL) on Q4 2022 Results - Earnings Call Transcript

Operator: Good afternoon. Thank you for standing by. Welcome to Oracle's Fourth Quarter 2022 Conference Call. It's now my pleasure to hand today's conference over to Oracle's Senior Vice President, Ken Bond. Ken Bond: Great. Thank you, David. Good afternoon, everyone, and welcome to Oracle's fourth quarter and fiscal year 2022 earnings conference call. A copy of the press release and financial tables, which includes a GAAP to non-GAAP reconciliation and other supplemental financial information can be viewed and downloaded from our Investor Relations website. Additionally, a list of many customers who purchased Oracle Cloud services or went live on Oracle Cloud recently will be available from the Investor Relations website. On the call today are Chairman and Chief Technology Officer, Larry Ellison; and Chief Executive Officer, Safra Catz. As a reminder, today's discussion will include forward-looking statements, including predictions, expectations, estimates or other information that might be considered forward-looking. Throughout today's discussion, we will present some important factors relating to our business, which may potentially affect these forward-looking statements. And these forward-looking statements are also subject to risks and uncertainties that may cause actual results to differ materially from statements being made today. As a result, we caution you against placing undue reliance on these forward-looking statements, and we encourage you to review our most recent reports, including our 10-K and 10-Q and any applicable amendments for a complete discussion of these factors and other risks that may affect our future results or the market price of our stock. And finally, we are not obligating ourselves to revise our results or these forward-looking statements in light of new information or future events. Before taking questions, we'll begin with a few prepared remarks. And with that, I'd like to turn the call over to Safra. Safra Catz: Thanks, Ken, and good afternoon, everyone. As you can see, we had an excellent quarter across the board with total revenue growing 10% in constant currency, the highest organic growth we've seen since 2011, and $240 million above the high end of my constant currency guidance. Earnings were equally strong as the EPS was $0.20 above the high end of guidance. What Q4 demonstrates is that our business is accelerating. A growing list of customers, many new to Oracle are choosing us for more products and services as they understand the benefits of Oracle technology. Our technology helps make our customers modern, efficient and more productive. And they got to see that during the pandemic, and now it's very clear. Those customers are then becoming larger Oracle customers. Fusion customers are buying OCI. OCI customers are buying Fusion and NetSuite. Database customers are moving to autonomous on OCI. Industry vertical customers are going all in on Fusion. We have real momentum all around. Going forward and despite the macro environment, we continue to expect the revenue growth in our cloud business will accelerate substantially in fiscal year '23. We are also excited about completing the Cerner acquisition. Larry spoke at our Oracle Health Strategy session last week, and he'll give you more details today, and I'll fill in with some numbers. As you can see in the financial statements, the currency headwind this past quarter was 5%, which was considerably higher than the 2% to 3%, it was during our last earnings call. Following my regular custom, I'll be reviewing our non-GAAP USD results using constant currency growth rates so you have a clear view of the business as we manage it. Now for Q4, total cloud services and license support revenue for the quarter was $7.6 billion, up 7% in constant currency again, driven by Fusion, NetSuite, autonomous database and, of course, Gen 2 OCI. Total cloud revenues, that's IaaS plus SaaS was USD 2.5 billion, up 22% in constant currency. Application subscription revenues were $3.2 billion, up 9% in constant currency. Our strategic back-office cloud applications now have an annualized revenue of $5.4 billion and grew 24% in constant currency this quarter, including Fusion ERP up 23% and NetSuite ERP up 30%. Infrastructure subscription revenues were $4.4 billion, up 5% in constant currency. Infrastructure, cloud services now have an annualized revenue of more than $3.2 billion, and excluding our legacy hosting services, infrastructure cloud services grew 49%, including OCI consumption revenue, which was up 83%. Cloud@Customer consumption revenue, which was up 108% and autonomous database, which was up 29%. License revenues were $2.5 billion, up 25% in constant currency led by database sales for use in the cloud by major application cloud SaaS companies. As a result our database business had an exceptional quarter with total database revenue up double digits. So all in, total revenue for the quarter were $11.8 billion, up 10% in constant currency. Operating expenses were up 11% as we continue to invest to meet growing demand for our cloud services. For the quarter, the gross margin for cloud services and license support was 82% and the gross profit dollars grew 4%. The full year growth of this gross profit was 4% higher than the 2% we saw last year, and I expect it will be significantly higher in FY '23. Though we will continue to invest in growth, we should benefit from economies of scale of running our cloud business as it gets larger. You should keep in mind that our fundamental principle going forward is to grow non-GAAP EPS while accelerating cloud revenue growth. Non-GAAP operating income was $5.6 billion, up 8% from last year, and the operating margin was 47%, once again higher than all of our competitors. And even while we've been investing aggressively for growth, we've maintained our financial discipline. The non-GAAP tax rate for the quarter was 10.1 and below our base tax rate of 19% as we received a benefit from the resolution of some tax matters in Q4. EPS was $1.54 in U.S. dollars, up 7% in constant currency, unchanged in USD. GAAP EPS was $1.16, down 8% in constant currency, down 15% in USD. Now for the -- let me go through the full fiscal year, though I've given you some full year numbers so far every once in a while. For the full fiscal year, total company revenues were $42.4 billion, up 7% in constant currency and our highest annual growth rate in more than 10 years. Total applications revenue grew 8% compared to 5% last year, and total infrastructure revenue grew 7% compared to 2% growth last year. Clearly, our revenue growth accelerated this year as investments into our cloud businesses are paying off. Total cloud services and license support revenue for the year was $30.2 billion, up 6%. Total cloud services were up 22% to $10.8 billion. Non-GAAP EPS was 4.9 -- was USD 4.90, up 5% in USD, up 8% in constant currency. The full year operating margin percentage was 46%, up 2% from pre-pandemic levels and down a little bit -- down 1% from last year. Operating cash flow over the last 4 quarters was $9.5 billion, and free cash flow was $5 billion with capital expenditures of $4.5 billion during the year. For the quarter, operating cash flow was $4 billion and free cash flow was $2.6 billion. At quarter end, we had nearly $22 billion in cash and marketable securities, but that's lower now that Cerner has closed. The short-term deferred revenue balance was $8.4 billion, up slightly in constant currency. The remaining performance obligation or RPO balance is $46.6 billion, up 17% in constant currency due to strong bookings. Approximately 57% is expected to be recognized as revenue over the next 12 months. As we've said before, we're committed to returning value to our shareholders through technical innovation, strategic acquisitions, stock repurchases, prudent use of debt and a dividend. This quarter, we repurchased 8 million shares for a total of $600 million. In addition, we paid out dividends of $3.5 billion over the last 12 months, and the Board of Directors declared a quarterly dividend of $0.32 per share. With the completion of the Cerner acquisition, which happened after the end of Q4, actually, this last week, we've added about $15.8 billion of debt. And we anticipate retaining our investment-grade credit rating, meaning that for the time being, we're going to focus on reducing our debt balance while continuing our share repurchases at current levels. In addition, I don't believe the dividend will be impacted at all. Once the debt level has declined, we'll reexamine share repurchase levels. Now to the guidance. We feel very optimistic about our business momentum. And we also recognize that there is increasing macro uncertainty right now. In addition, since we ceased operations in Russia in March and made other adjustments in the region, we have factored out around $100 million per quarter from guidance that we used to receive from these customers. Taking all that into account, I do expect our cloud business, which grew 22% this year, will organically grow more than 30% in constant currency in FY '23. Cloud service and license support will also see growth acceleration and could well see double-digit organic growth. As I said earlier, our fundamental principle is to grow EPS while accelerating cloud revenue growth. Given our increasing confidence in organic revenue growth, we will continue to prudently invest back in the business and you can already see the returns in our performance. Revenue growth accelerated from 2% in FY '21 to 7% this year. Clearly, there's strong demand for our cloud services, and we intend to capitalize it -- to capitalize on it. As such, I expect our CapEx spend will be higher in FY '23 to meet the demand. We expect to add another 6 regions in fiscal 2023 in addition to the 38 cloud regions across 20 countries that we have already serving our customers. I also want to share how we will be running Cerner since it will impact their contribution to Oracle going forward. We are already working actively to build and implement world-class health care cloud capabilities. Larry will go over that. This means that we are reviewing their entire product portfolio to identify areas where we can include Oracle technology rather than third-party products as well as moving them to OCI. These efforts will deliver a more stable, secure and innovative product portfolio for customers while using less third-party products. We remain confident in our ability to grow Cerner's top line and bottom line faster than they were able to do so on their own as these changes are implemented. Now let me turn to my guidance. I'll review Q1 on a non-GAAP basis and if currency exchange rates remain the same as they are now, currency should have a 3% to 4% negative impact on total revenue and maybe $0.05 to $0.06 negative effect on EPS in Q1. However, actual currency impact may be different. Total revenues for Q1, including Cerner, are expected to grow from 20% to 22% in constant currency, and are expected to grow 17% to 19% in USD at today's exchange rate. As with past acquisitions, have added conservatism for the Cerner revenue contribution to account for the transition. For Q1, cloud -- total cloud excluding Cerner is expected to grow from 25% to 28% in constant currency and is expected to grow from 22% to 25% in USD. As I mentioned above, for fiscal year 2023, total cloud excluding Cerner is expected to grow over 30% in constant currency. Total cloud growth in Q1, including Cerner is expected to grow from 47% to 50% in constant currency, 44% to 47% in USD. Non-GAAP EPS is expected to grow between 6% to 10% and be between $1.09 and $1.13 in constant currency. Non-GAAP EPS is expected to grow between 1% to 5% and be between $1.04 and $1.08 in USD. And as I've said before, Cerner will be accretive to earnings this year, including Q1. My EPS guidance for Q1 assumes a base tax rate of 19%. However, onetime tax events could cause actual tax rates for any given quarter to vary. And with that, I'll turn it over to Larry for his comments. Lawrence Ellison: Thank you, Safra. As Safra said, our plan is to accelerate cloud revenue growth, while continuing to grow earnings per share. First, let me provide some detail on how we plan to accelerate cloud revenue growth. It all starts with our two most important verticals: health care and financial services. In health care, we’re in the process of building a complete suite of applications for the entire health care ecosystem, starting with health care providers like hospitals and clinics. We’re modernizing Cerner’s clinical systems by adding capabilities like a voice user interface and applications like disease-specific AI models for cancer and other diseases. We’re including an IoT device network to improve patient diagnostics and monitoring. We’re adding administrative systems, including managing the incredibly complex contract workforce that hospitals have as doctors are not bolt-on employees nor are nurses. We are going to help recruiting, scheduling and paying those contract workers according to their contracts. Inventory at hospitals is enormously complicated. Inventories aren’t in a central location. You find inventory in nurse’s stations outside operating rooms, outside the intensive care unit. There’s inventory everywhere. Managing that inventory is very complicated. We’re adding RFID tags and maps on handheld phones to help people find what they’re looking for quickly. For payers, including insurance companies and governments, we’re automating payment authorization and billing systems. For pharmaceutical companies, we’re integrating our clinical trial system directly into the hospital clinical system, making clinical trials easier to start and faster to complete. We can do all of this and more because we’re building these health care applications using the latest most productive technologies in the cloud, namely, the Oracle Autonomous Database and the APEX low code programming language. Using these tools, security and reliability are built into the technology platform, not the application. In our financial services vertical, we’re working with major money center banks and leading logistics companies to automate B2B commerce from directly within the Oracle ERP Cloud. For example, when a hospital wants to buy an X-ray machine, that hospital simply enters a purchase request for the X-ray machine into their Oracle ERP procurement system. That procurement system then sends that order directly to the selling company’s Oracle ERP order management system and automatically originates a corresponding loan request from that hospital’s preferred bank. The company selling the X-ray machine uses their Oracle ERP order management system to check product availability and submit a shipping request to their preferred logistics provider to automatically quote a delivery date to the buyer. The entire B2B commerce process is automated within the Oracle Cloud. Purchasing, selling, loan origination, shipping, billing and payments. Automating B2B commerce is yet another huge opportunity for Oracle. We already have over 30,000 Cloud ERP customers, including many of the world’s most important banks and leading logistics companies. Let’s take a moment to look at the progress we continue to make in our Oracle ERP Cloud, starting with health care. We’ve got a very strong position in health care with the providers, including Kaiser, Mayo Clinic, Cleveland Clinic, Mount Sinai, Northwell Health, Tenet, HCM Health, Highmark Health, Humana, Cigna and many others. In Q4, we closed United Healthcare, a win over SAP. We won the NHS, the UK’s second major move to the Cloud. We won New South Wales Ministry of Health in Australia for ERP and SCM. We won WellSpan, a regional provider in Pennsylvania with eight hospitals. We won Abcam, a UK life sciences company, increasing their footprint in ERP and SCM. Going live in Q4 were the Cleveland Clinic with ERP and SCM, UC Health for ERP and SCM, Pfizer on enterprise performance management, UK Health went live, Atrium Health went live, all in Q4. In financial services, our other really big vertical, we had, as I said earlier, we have a very strong position with the money center banks with ERP. Bank of America uses Fusion applications. JPMorgan Chase uses Fusion applications. So does Santander, Bank of New York Mellon, HSBC, Lloyds, Macquarie, Credit Suisse, UBS, Credit Agricole, SMFB, TD Bank, Societe Generale, Vanguard, State Street. I can go on and on, but let me go to the results in Q4. In Q4, we won at Citibank a big ERP win against SAP. We won at Chubb. We won at PNC, the sixth largest bank in the United States. We won at SMBC, the largest Japanese-owned bank in the United States. We won Oversea China Banking Corp. We won Mizuho, the third largest bank in Japan. TIAA, Desjardins, Mitsui Sumitomo also in Japan. GMP, one of Mexico’s largest financial services company. We have a very, very strong position in financial services. That’s one of the key groups of partners that we’re working to automate B2B commerce, along with the logistics companies. In retail, we won, well, we already had Kohl’s, Office Depot, Macy’s, Kroger’s, Albertson’s, Petco, McDonald’s, Chipotle, Tiffany, Sachs, Williams-Sonoma, Walmart, CVS, but in Q4, we added to that list. We added Lowe’s and Albertson’s and Sherwin-Williams and Abercrombie & Fitch. We had major go-lives at Macy’s, Next Doors, and the Co-op Stores, all in retail. In communications, where we’re already present at AT&T, Orange, MTN, Bharti Airtel, Rogers, Wind Tre, Telecom Italia, KPN and SEC, we won Virgin Media. We had a major expansion at AT&T, an ERP SCM expansion. We won a major expansion ERP and EPM at Verizon. Very, very strong quarter in telecommunications with a huge go-live at KPN, the Dutch telecom company, in ERP and SCM. Service wins, we already have PwC, KPMG, Booz Allen, True Blue, Securitas, Waste Management, Skanska, McDermott-Jacobs. We won in Q4 BDO, Verisk Analytics and the Mudafalo Group. Go-lives in Q4 in services included Pricewaterhouse, Manpower Group, TriNet and Republic Services. In the public sector, we had a major win at the State of Missouri, wall-to-wall at the State of Missouri, ERP, SCM, HCM. That was a win over Workday, SAP and everybody else. We won at the Scottish Government. We won at the UK Home Office. We won a State of Switzerland, Vaud. We won General Organization for Social Insurance in Saudi Arabia. We won a deal with the police department in the State of Victoria in Australia. We had major go-lives in public sector in the City of St. Louis and Norfolk County, UK. In hospitality, where we already have Marriott, Hilton, Caesar’s, MGM, Lowes, Royal Caribbean and Park Hotels, we added Airbnb for ERP expansion, a win over Workday, and Intercontinental Hotels and Resorts. Logistics, again, this is our other big group of partners in our major effort to automate B2B commerce from within the Oracle ERP Cloud. We have a very strong position globally in logistics. Our customers include UPS, FedEx, DHL, Swift, Schneider, Union Pacific, Yellow. We added An Post, the postal service of Ireland. The go-lives included DHL, UPS and Deutsche Post. In higher ed, where we’re already installed at Princeton, Cambridge, Julliard, Vanderbilt, UCLA, University of Chicago, Edenborough, Rutgers, Baylor, UCSD and lots and lots of others, we added the University of Maine, East Tennessee State, Villanova and the State University of New York at Stony Brook. Other notable wins in the quarter, on high-tech, we won Teradata. We won a big win at Toyota Motor, an ERP win. At Denso, again, let’s see, what else we got. Berry Global, let’s see, AP Team was another ERP win in energies. Okay. So it was a very, very strong quarter. We’re very excited about our momentum in ERP and how we can expand ERP from what it was when it was an on-premise system to what it can be in terms of B2B commerce automation now that it’s a cloud system. With that, I’m going to turn it back to Safra. Ken Bond: Thank you, Larry. David, if you please poll the audience for questions, we'll go to the Q&A portion of the call. Operator: We'll take our first question from Mark Murphy with JP Morgan. Mark Murphy: Thank you very much and congratulations on the double-digit growth in the quarter. So Larry, your vision of a national health record database is very compelling. It would be a profound benefit to society. Just considering that several trillion dollars are spent on healthcare, what do you see as the size of the opportunity for Oracle and Cerner if you solve that particular problem? Lawrence Ellison: Well, the national health records database solves 2 problems, and it allows patients in the case of an emergency to have their caregivers get immediate access to all of their health records, which will deliver way better outcomes for people. The other is public health officials will get much better information about the state of health in their country. So I mean, the amount of -- having this knowledge, it's -- we dramatically improved healthcare but we also save an enormous amount of money by doing that. I don't know if you remember when we sent that hospital (ph) in New York City because the officials in New York thought they were about to run out of the hospital beds. It turns out they were wrong. We didn't run out of hospital beds, but they didn't know. They don't have -- public health officials don't have access to that kind of information. They're a bit flying -- it was very clear there are -- in a lot of cases, they were flying blind during the pandemic. By providing this information, we save a lot of lives and we save a lot of money. The scale of the opportunity is gigantic because it's not -- people think of it as a national opportunity. It's a global opportunity. Every country -- I mean, if you look at Western Europe, the Western Europe budgets are dominated by health care. If they can save lives and save money by putting in modern information systems, they'll do it and they'll do it quickly. It's clearly going to be our largest business. Operator: Next, we'll go to Keith Weiss with Morgan Stanley. Keith Weiss: Congratulations on a really solid quarter. So Safra, you mentioned on the conference call that you guys are putting up this type of result even on the backdrop, that's not the most stable kind of macro backdrop. And we're seeing a lot of other software companies seeing slipped deals, seeing issues with the consumer, Internet companies lowering their spend. You guys seem to be working through this very well. Can you give us some color into how you're doing it? Is it better execution? Is the Oracle value proposition going through more clearly? Can you help us understand where you're able to put up a bigger beat when a lot of guys are working with skinnier beat if at all during this period? Safra Catz : Okay. Well, first of all, you have to understand, we're a very big company. We have thousands -- hundreds of thousands of existing customers. Our products also are so compelling that often customers save money by moving to OCI. They -- also many of our customers realized during the pandemic that they absolutely had to have modern systems. Those companies that didn't have modern systems fairly survived through the pandemic. They have to have a digital connection with their customers, with their employees, with their suppliers. Those are the kinds of products we have. And when customers move, let's say, from Amazon to us, the moment they try us, they realize, whoa, this is better and more economical. And of course, for Oracle workloads, you can't get anywhere close to what we can do. So we have a lot of things working in our favor. Our products, of course, our Fusion products are superb. I mean we have so many customers. This call is not long enough to reach them. And of course, NetSuite is, again, industry-leading like Fusion for a different part of the market, incredible momentum. And now we -- by the way, as I mentioned, there's about $100 million a quarter that is just the Russia, Ukraine region, that we stopped charging our customers in Ukraine when they were invaded even though we continue to help them. And of course, we suspended everything in Russia. So we just are just trying to meet our customers' needs. The biggest issue is having enough to meet demand. And I'm actually very happy with the way we manage the supply chain this past quarter, and I'm hoping that it will be -- it will continue to get better because that will give us more capacity and more capability to deliver to our customers. So I mean, we just have so much momentum. We have so many happy customers. And they're just -- new customers are just buying more. You get into the cycle that's very virtuous and people really build confidence in our capability to execute and also the overall economic message and offering that we're giving, We've always tried to give a compelling financial offering. And I think that's really resonating in these times. Operator: Next, we'll go to Brad Zelnick with Deutsche Bank. Brad Zelnick : Thanks very much for taking my questions and congrats on the great results. Larry, we picked up a meaningful uptick in the number of large enterprise agreements or ULAs that customers are doing with Oracle. And in particular, to satisfy their database needs, both on-premise and also in the cloud. Do you have any telemetry or other insights into customer behavior to see where they're deploying these licenses? And can you talk about why BYOL is so important to your strategy and the longevity of Oracle database? And maybe just for Safra as well, that license number was so strong. And in your prepared remarks, you mentioned license growth was led by database use in the cloud by major app cloud SaaS companies. Just wondering if there's any more color you can provide there. Lawrence Ellison : Yes. With the exception of Workday, most of the big application companies maybe conspicuously, salesforce.com is a very large Oracle user. And they license our database for use in their cloud. But they're not the only ones. There are a lot of SaaS companies that use our database in the cloud. And that keeps our license business very, very strong. Our database license business is very, very strong. We don't confuse a license for on-premise. Some licenses classically are used on-premise, but a lot of the new licenses that we're selling allow our customers to take those licenses and run them in the cloud, whether it's our cloud or other people's clouds or in the case of Salesforce in their own cloud. So it's -- the Oracle database is still the #1 database in the world by a significant margin. And it's the #1 database in the cloud when you start counting all of the SaaS companies that use the Oracle Database. Operator: Next, we'll go to Mark Moerdler with Bernstein Research. Mark Moerdler: Congratulations on the strong quarter and the very positive commentary and guidance. I'd like to drill a little more on this question of people's concerns. With the increasing concerns of recession by many, can you tell me what you're seeing for the apps part of the business and more specifically for ERP? What I'm trying to understand is how will the shift in ERP to the cloud be impacted by any economic slowdown or won't it be? How should we think about that? Lawrence Ellison : Well, I'm not sure I call it -- I'm sorry, Safra, Pease go ahead. Safra Catz : No. You go ahead, Larry. You go ahead. Lawrence Ellison : Yes. Okay. I'm not sure I'd call it countercyclical, but the cloud systems cost a lot less than the on-premise systems to run. So -- and they give you much better information. They allow you to control expenses better. They don't cost that much to implement because you pay for them over time. So we -- what we're seeing is a -- let's take a look at NetSuite, which is the low end of the market, and you think those would be the companies to be most affected by the recession. It's not JPMorgan Chase. They'll keep building -- they'll keep putting in new systems. But some smaller entrepreneur-led companies, you think that the recession we got them. They had -- we got the most revenue we ever got from NetSuite this past quarter. and the highest growth rate that we've ever gotten from NetSuite this past quarter. They are accelerating into the recession because we think the benefits are enormous and it equips the companies to compete more effectively. And again, we don't see that business slowing down. Quite the contrary, we see our ERP business both Fusion and NetSuite accelerating. This in spite of the macroeconomic situation. Safra? Safra Catz : Yes. I think people don't realize how exorbitantly expensive it is to run those large SAP systems. They have data centers associated with them. They have hundreds, sometimes thousands of technicians to run them. They're old, they're clunky and moving to Fusion ERP. It's just a totally different world and costs So - the costs are tiny in comparison. I think people sort of forget that. And this applies really to all on-premise systems, but even more so to those old SAP systems. And our cloud offering in that area really is unrivaled. Frankly, unrivaled. And we -- our win rates just continue. And we're very optimistic about it, and we've sold a lot. A lot is still being implemented, and we expect that you'll see that in the numbers, while our customers end up spending less than what they use to spend with on-premise. Operator: Next, we'll go to Phil Winslow with Credit Suisse. Philip Winslow: Last quarter, Safra, you expected organic revenue growth to reach double digits next fiscal year. And so congratulations on reaching that double-digit milestone this quarter. Now within today's results, 2 numbers really stood out to us. First was the upside to license revenue. And then second was your commentary about total database revenue growing in the double digits. So my question is, Safra, Larry, can you give us more color on what's driving that reacceleration in license revenue in particular? Even as cloud revenue inflected to its highest growth rate in more than 4 years, is this BYOL bringing the heat? Is this autonomous database getting big enough and growing fast enough to lift the overall number, et cetera. And is this the broad-based demand that you mentioned on the Q3 call? Or is this more big deal driven? Safra Catz : So it's a little of both. You see, first of all, large enterprises understand that having an unlimited agreement for some period of time, an unlimited agreement gives them unbelievable flexibility. Any large customer, large database user that does not have an unlimited agreement with us is really not optimizing for their spend because it gives them incredible flexibility. They can use on-premise for as long as they need it. They can move to the cloud and get a much lower price in the cloud with BYOL, and they can move back and forth. And it just gives us the kind of flexibility. Those agreements are the ultimate sort of the foundation of so much of what goes on. In addition, of course, in technology, we also have our leading Java business, which on-premise is an extensive use and in the cloud is at no charge. So customers can be motivated to bring their Java to the Oracle Cloud and to use it at no charge, their Java program and to use it at no charge. So we have a lot of things that incent bringing your Oracle databases to our cloud and, of course, all your Java work to our cloud. So both of those are absolutely critical for our license numbers to be as strong as they are. And the Oracle database, I've been following Oracle for, well, since the '80s. And I always -- we always hear about some new product that's about to overtake Oracle. And the reality is that the Oracle database is beyond the gold standard. If you really need work done and if you want to protect your most critical data and you want to use large amounts of it, it is going to be the Oracle database that is head and shoulders above every other product. And invariably, some folks try other things when they get bigger, they always come back to the Oracle database It is irreplaceable because of its technical capabilities that are so far superior. And that becomes very, very, very clear to customers and more and more of them license -- continue their license and extend those unlimited agreements, whether for on-premise and in the cloud. It's not either or it's both, and that is the best use of it. Lawrence Ellison: I'll add 1 thing to that, which is the Oracle Autonomous Database is interesting because it's autonomous. In other words, it doesn't require human beings to run it like database administrators, things like that. Recently, inside of Oracle, inside of our cloud, virtually every database going up for -- to run our cloud, the autonomous database because people don't want to hire database administrators inside of Oracle Corporation. It's just much cheaper to run. And I think in that sense, the Autonomous database is countercyclical. You do save a huge amount of money just by moving from conventional Oracle database to the autonomous database. It's actually more secure, more reliable and cost Wales to run. You don't need a bunch of experts running it. You don't need anyone to run it. There is a programming language called APEX, which uses -- it's a low code programming environment where you use 10% the name amount of programmers that you would use if you were programming in our other programming language called Java. And APEX is also becoming very popular inside of Oracle to build applications. I see this as 2 interesting trends as people using more modern technology to dramatically reduce their labor costs, which I think will play very well in the next couple of years in this economy. Operator: And our final question comes from Kirk Materne with Evercore ISI. Kirk Materne: Thanks for taking the questions and congrats on a good quarter. Safra, can you just give any additional color on the CapEx outlook for fiscal '23 relative to what we saw this year? And then just to clarify on the buyback, I just want to make sure I heard it correctly. Is the pace of buyback that we saw this last quarter still reasonable for the near term, even with the incremental debt from Cerner? Safra Catz : Yes. So let me hit the buyback first because I know I gave you quite a word sandwich there at the end. I was losing steam. We bought back $600 million this past quarter. I think we bought back about $600 million the previous quarter. I expect to do about the same this quarter. Usually, I don't give you the number in advance. But since previous quarter, to those 2, we did $7 billion and a couple of $8 billion. We're not going to be at that level. We'll be at the $600 million for a few quarters until I see where our debt levels are. And so $600 million a quarter is probably what I'm targeting. It could be a little bit more potentially but that's kind of where I'm at. And then on CapEx, okay. So you noticed how I mentioned how many regions we have, we have just put out -- put up so many regions over the past 1.5 years or 2. I think we now have more than Amazon or we're in -- I think we do already have more than Amazon already. We are going to build another 6, and we're going to expand the ones that we have because they are being used so extensively. In many cases, they are spoken for. And so I expect CapEx, which was where it was this year. I think it will be a little bit more than what it was this year, next year. I'll be giving a little bit more detailed guidance as I see it playing out over the year. But we have so much -- I mean we have so much cloud demand that I am going to continue to spend in capital expenditure. But I do believe that as a percentage of our revenue growth. I think I'll start really feeling those economies of scale and increasing my gross margins and my operating margin significantly. Ken Bond: A telephonic replay of this conference call will be available for 24 hours on the Investor Relations website. Thanks for joining today. With that, I'll turn it back to David for closing. Operator: This concludes today's conference call. You may now disconnect.
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Oracle Corporation's (NYSE:ORCL) Stock Upgrade and Financial Outlook

  • Oracle Corporation (NYSE:ORCL) receives an "Overweight" rating from Piper Sandler, indicating a positive future performance outlook.
  • The company faces challenges with a "Sell" rating due to perceived overvaluation, despite strong growth in cloud services.
  • High CAPEX spending impacts Oracle's free cash flow, with forecasts showing revenue and EPS growth in the coming quarter amidst market volatility.

Oracle Corporation (NYSE:ORCL) is a leading technology company known for its software products and services, particularly in database management. The company has been expanding its cloud services, with Oracle Cloud Infrastructure being a key growth area. Oracle competes with other tech giants like Microsoft and Amazon in the cloud computing space.

On December 10, 2024, Piper Sandler upgraded Oracle's stock to an "Overweight" rating, suggesting confidence in its future performance. At the time, Oracle's stock was trading at $177.74. Piper Sandler also increased Oracle's price target from $185 to $210, as highlighted by TheFly, indicating a positive outlook for the company's stock.

Despite this upgrade, Oracle's stock has faced challenges. It received a "Sell" rating due to perceived overvaluation, with a fair value estimated at $155 per share. This suggests that some analysts believe the stock is priced higher than its intrinsic value, which could pose risks for investors.

Oracle's financial performance is influenced by its capital expenditure (CAPEX) spending. The company is experiencing strong growth in its cloud services, but high CAPEX spending impacts its ability to generate free cash flow. This could affect Oracle's financial health, especially with anticipated increases in CAPEX for fiscal year 2025.

Oracle forecasts revenue growth of 9% to 11% and earnings per share (EPS) growth of 7% to 9% for the third quarter. However, the stock has seen a decrease of approximately 6.67%, with a change of $12.71. The stock's trading range for the day was between $171.06 and $177.80, reflecting market volatility.

Oracle Corporation's Fiscal Q2 Earnings Analysis

  • Oracle Corporation (NYSE:ORCL) reported a slight miss in both earnings per share (EPS) and revenue for its fiscal second quarter.
  • The company's EPS has shown growth over the past year, indicating a positive trend in profitability despite the miss.
  • Oracle's financial metrics reveal a high market valuation and potential challenges in financial stability due to a high debt-to-equity ratio.

Oracle Corporation, listed on the NYSE:ORCL, is a leading technology company known for its software products and services, including database management systems and cloud solutions. It competes with other tech giants like Microsoft and SAP. On December 9, 2024, Oracle reported its fiscal second-quarter earnings, revealing a slight miss in both earnings per share (EPS) and revenue compared to market expectations.

Oracle's earnings per share for the quarter were $1.47, just below the Zacks Consensus Estimate of $1.48. This represents a 0.68% negative surprise. However, it is an improvement from the $1.34 EPS reported in the same quarter last year. Despite the miss, Oracle's EPS has shown growth over the past year, indicating a positive trend in profitability.

The company generated $14.06 billion in revenue for the quarter, which was slightly less than the estimated $14.12 billion. This shortfall resulted in a negative revenue surprise of 0.46%. Nevertheless, Oracle's revenue increased by 8.6% compared to the same period last year, showcasing its ability to grow its top line despite missing estimates.

Oracle's financial metrics provide insight into its market valuation and financial health. The company's price-to-earnings (P/E) ratio is approximately 45.46, suggesting a high market valuation of its earnings. Its price-to-sales ratio is about 9.61, and the enterprise value to sales ratio is around 11.02, indicating how the market values Oracle's revenue and sales, including debt.

Oracle's debt-to-equity ratio is notably high at 6.23, reflecting a significant level of debt compared to its equity. This could pose challenges in terms of financial stability. Additionally, the current ratio of approximately 0.81 suggests potential liquidity issues, as it indicates the company's ability to cover short-term liabilities with its short-term assets.

Oracle Corporation's Upcoming Earnings Report: A Comprehensive Analysis

  • Earnings Expectations: Analysts predict an EPS of $1.48 and revenue of approximately $14.1 billion.
  • Valuation Concerns: Oracle is perceived as overvalued by about 20%, with a P/E ratio of approximately 47.33.
  • Investment in AI: Demand for Oracle's AI services is outpacing supply, highlighting the importance of computing power for operations.

Oracle Corporation (NYSE:ORCL) is gearing up to release its quarterly earnings on December 9, 2024. Analysts predict an earnings per share (EPS) of $1.48, with revenue expected to reach around $14.1 billion. Oracle, a leader in database management and enterprise software, competes closely with tech giants like Microsoft.

Despite its strong market position, Oracle's stock is perceived as overvalued by about 20%, based on a discounted cash flow (DCF) model and comparisons with its five-year averages and Microsoft. The company's price-to-earnings (P/E) ratio is approximately 47.33, indicating a high valuation relative to its earnings. Its price-to-sales ratio is about 9.69, and the enterprise value to sales ratio is around 11.06.

Oracle maintains a strong economic moat in Database Management Systems (DBMS), Enterprise Resource Planning (ERP), and Cerner. However, its position is less robust in Infrastructure as a Service (IaaS) and hardware. The company's growth is expected to accelerate to around 12% by 2026, driven by capital expenditures in the IaaS Cloud sector. This growth raises concerns about potential impacts on profit margins.

Oracle's financial metrics reveal a debt-to-equity ratio of roughly 7.81, indicating a significant level of debt compared to its equity. The current ratio stands at approximately 0.72, suggesting potential liquidity challenges in meeting short-term obligations. The enterprise value to operating cash flow ratio is about 31.13, and the earnings yield is around 2.11%.

As Oracle prepares to report its fiscal 2025 first-quarter results, investors should focus on the company's AI capabilities. The demand for Oracle's AI services is outpacing supply, driven by the need for large language models (LLMs) in AI chatbots and applications. These models require substantial computing power, a critical factor for Oracle's operations.

Oracle Corporation (NYSE:ORCL) Overview and Financial Performance

  • Oracle Corporation (NYSE:ORCL) has been highlighted for its strong performance, outpacing the Zacks S&P 500 composite.
  • The company's stock has shown significant volatility with a high of $178.61 and a low of $99.26 over the past year.
  • With a market capitalization of approximately $485.8 billion, Oracle remains a key player in the technology sector.

Oracle Corporation (NYSE:ORCL) is a major player in the technology sector, known for its comprehensive suite of software solutions and cloud services. Competing with giants like Microsoft and SAP, Oracle has carved out a significant market share. Recently, Rishi Jaluria from RBC Capital set a price target of $165 for Oracle, while the stock was trading at $175.31, indicating a potential downside of approximately -5.88%.

Despite this price target, Oracle has been a focal point for investors, frequently appearing on Zacks.com's list of the most searched stocks. Over the past month, Oracle's stock has delivered a positive return of 4.7%, outperforming the Zacks S&P 500 composite's 2.8% increase. This performance underscores Oracle's strength, especially when compared to the Zacks Computer - Software industry, which saw a decline of 1.8%.

Oracle's current trading price of $175.31 reflects a recent increase of 0.892%, with a price change of $1.55. The stock has fluctuated between a low of $174.31 and a high of $175.85 today. Over the past year, Oracle's stock has reached a high of $178.61 and a low of $99.26, showcasing its volatility and growth potential.

With a market capitalization of approximately $485.8 billion, Oracle remains a formidable force in the tech industry. Today's trading volume of 3,624,247 shares indicates strong investor interest. As the market looks ahead, earnings estimate revisions will be crucial in assessing Oracle's future prospects and potential stock movements.

Oracle Corporation's Price Target Raised by Jefferies

  • Brent Thill of Jefferies has increased the price target for Oracle Corporation (NYSE:ORCL) to $190, indicating a potential upside of 17.26%.
  • Oracle's strategic focus on cloud computing and non-relational databases aims to strengthen its competitive position in the technology sector.
  • The company's financial health and market performance, with a stock price of $162.03 and a market capitalization of approximately $448.98 billion, reflect investor confidence and potential for future growth.

Brent Thill of Jefferies has recently adjusted the price target for Oracle Corporation (NYSE:ORCL) to $190, up from its previous target of $170. This new target suggests a potential upside of 17.26% from the current trading price of $162.03, as reported on September 15, 2024. This optimistic revision reflects a growing confidence in Oracle's strategic direction and market position. Oracle, a leading technology firm, has been making significant moves to expand its product offerings, particularly in the cloud and non-relational database sectors, aiming to strengthen its competitive edge in the technology landscape.

Oracle's strategic pivot towards cloud computing and non-relational databases is a response to the evolving demands of the tech industry. By diversifying its product portfolio, Oracle not only secures its standing in the database market but also positions itself as a formidable competitor against other tech giants. This move is crucial for Oracle to maintain its relevance and drive growth in a sector that is increasingly dominated by cloud-based solutions and innovative database technologies.

In comparison, MongoDB, another major player in the database market, has been focusing on building a strong community around its ecosystem. This approach has allowed MongoDB to foster a loyal user base and drive growth through community-driven innovation. Oracle's expansion into similar territories indicates a strategic effort to not only enhance its product offerings but also to tap into the dynamic needs of developers and organizations, much like MongoDB has successfully done.

The financial markets have responded positively to Oracle's strategic initiatives and market performance. With a stock price reaching $162.03 and a market capitalization of approximately $448.98 billion, Oracle demonstrates strong financial health and investor confidence. The trading session's volatility, with prices ranging from $161 to $173.935, further highlights the market's reaction to Oracle's ongoing developments and its potential for future growth.

Oracle's recent performance and strategic moves underscore its commitment to maintaining a competitive edge in the rapidly changing tech landscape. By focusing on cloud computing and non-relational databases, Oracle not only diversifies its product portfolio but also enhances its ability to meet the evolving needs of the market. This strategic direction, coupled with the company's strong financial indicators, supports the optimistic outlook presented by Brent Thill of Jefferies, suggesting a promising future for Oracle in the technology sector.

Oracle Shares Surge 6% to Record High

Shares of Oracle Corporation (NYSE:ORCL) surged more than 6% pre-market today driven by the company’s optimistic outlook for future revenue growth fueled by demand in artificial intelligence.

The stock hit a new all-time high, continuing its upward momentum after reporting strong quarterly earnings earlier in the week and securing a key agreement with Amazon Web Services (AWS).

Oracle raised its fiscal 2026 revenue forecast to $66 billion, surpassing its previous estimate of $65 billion and exceeding Street's forecast of $64.5 billion. The company also projected that its annual revenue would reach at least $104 billion by fiscal 2029.

The company's rapid growth is being powered by the increasing demand for cloud services from the expanding artificial intelligence sector. However, Oracle faces competition from tech heavyweights such as Google, Microsoft, and Amazon in this space.

Oracle Stock Jumps 12% After Beating Q1 Estimates and Announcing Key Google Cloud Partnership

Oracle (NYSE:ORCL) shares surged over 12% intra-day on Tuesday after the company reported first-quarter results that exceeded Wall Street expectations.

The tech giant posted adjusted earnings per share of $1.39, surpassing the anticipated $1.32, with revenue coming in at $13.31 billion, also ahead of the expected $13.23 billion.

Oracle's cloud services and license support division generated $10.52 billion in revenue, reflecting a 10% year-over-year increase and topping the $10.47 billion Street estimate.

In its cloud and on-premises license segment, Oracle reported $870 million in revenue, marking a 7% growth, which surpassed expectations of $757.6 million.

The company’s cloud infrastructure business demonstrated strong performance with revenue of $2.2 billion, a 45% rise from the previous year. This marks an acceleration from the prior quarter's 42% increase, underscoring Oracle's growing presence in cloud computing.

Looking ahead, Oracle anticipates revenue growth of 8% to 10% for the current quarter, according to CEO Safra Catz. This aligns closely with analysts' projections of around 9% growth. The company also provided guidance for second-quarter earnings per share in the range of $1.45 to $1.49, compared to Street estimate of $1.47.

In a notable development for cloud and database technology, Oracle and Google Cloud have launched Oracle Database services within Google Cloud regions. This collaboration enhances multicloud strategies, allowing customers to deploy Oracle's database solutions directly within Google Cloud data centers.