Oracle Corporation (ORCL) on Q3 2021 Results - Earnings Call Transcript
Operator: Welcome to Oracle's Third Quarter 2021 Earnings Conference Call. Now I'd like to turn the call over to Ken Bond, Senior Vice President. Ken Bond: Thank you, Erica. Good afternoon, everyone. And welcome to Oracle's third quarter fiscal year 2021 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 customers mentioned on this customer conference call as well as many others which have purchased Oracle Cloud services or went live on Oracle Cloud recently will also be available from the Investor Relations website. Safra Catz: Thanks, Ken. And good afternoon, everyone. We are again, reporting earnings 10 days after the end of the fiscal quarter, faster than any other company in the S&P 500. Fusion Cloud ERP enables us to understand our business performance sooner and with greater insight, which is an advantage our customers are rapidly beginning to appreciate. As you can see, we had a great quarter and executed well against our growth plan. Revenue was in line with our USD guidance while EPS beat the mid-point of guidance by $0.05. Our total cloud services and license support revenue for the quarter was $7.3 billion, up 5% in U.S. dollars, 2% in constant currency, driven by Fusion, Autonomous Database and our Gen2 OCI cloud. Recurring revenue, as a percentage of total revenue now represents 72% of total company revenue and we anticipate this trend to continue as cloud services grow. Application subscription revenues were $3 billion up 5% in U.S. dollars, 3% in constant currency. Our strategic back-office cloud applications now have annualized revenue of $4 billion and grew 24% this quarter, including Fusion ERP up 27%, NetSuite ERP up 22% and Fusion HCM up 21%. Infrastructure subscription revenues were $4.3 billion, up 4% in U.S. dollars, up 2% in constant currency. Infrastructure cloud services now have an annualized revenue of more than $2 billion, including OCI consumption revenue, which was up 123%; autonomous database was up 55%; cloud customer consumption revenue was up over 200%, but on small numbers. Larry Ellison: Thank you, Safra. Three months ago, Bob Evans posted an article on the Cloud Wars’ website in which he quotes SAP, CFO, Luka Mucic making the following statement at an investors conference. And I quote, “I have checked and we have not lost a single ERP customer to Oracle.” In other words, after personally, checking SAP’s Chief Financial Officer could not find a single example of an SAP ERP customer move into Oracle Fusion on ERP, not one. Perhaps he should have checked a little bit more carefully. In Q3 alone we signed contracts, totaling hundreds of millions of dollars to migrate several very large SAP ERP customers, to Oracle Fusion ERP. But this was not just a recent Q3 event. This has been going on for a couple of years. Ken Bond: Thank you, Larry. Erica, if you could please pull the audience for questions. Operator: Our first question comes from Michael Turits with KeyBanc Capital. Michael Turits: Larry, thanks for all the color on ERP. I'd like to switch over to your database. You've made meaningful improvements in both cloud customer and OCI too which both one of the two are required for ADB. So, are those improvements enough that we're now starting to see the upgrades to ADB? And are you able to monetize those upgrades to the point where we'll start to see database growth acceleration? Larry Ellison: The answer is I think there's no question. You're going to see a lot of database growth – a lot of database acceleration starting next year which we're a quarter away from. But we'll be fine in Q4. Again, its autonomous databases is growing pretty rapidly. But we expect it really to explode next year. And I really do mean very, very rapid growth next year. I'm not really ready to disclose our plans as to why I think it's going to suddenly spike but we expect very, very rapid database growth next year. Michael Turits: Thanks, Larry. Operator: Our next question comes from Mark Murphy with JPMorgan. Mark Murphy: Yes. Hi Larry. This SAP replacement wave, feels like kind of a historic moment because that kind of activity it's usually so rare and these are the logos are pretty large that you're mentioning. So when we see… Larry Ellison: I acknowledge for interrupting. The really spectacular logos there's some of them are pretty spectacular on there. But we have some that are much larger and much – and absolutely shocking. I've been alluding to these, but sometimes we're in the middle of an 18-month implementation. And the customer doesn't want any mention. If I could mention them all, it would be – it’s front page news. I mean it's a very big deal. Yes. I agree with you. It's an historic event. It is – I think a long time ago, I said there are two technologies that will drive Oracle's future, one is the autonomous database and the other is ERP. We are – reading the Gartner report, we are so dominant. Our product is so much better than anyone else's product in the cloud. We expect to get a significant number more than half of SAP's customers we’ll get. But keeping our own, yes, plus getting a lot of it from the smaller companies like M4 and Lawson. Mark Murphy: So Larry, the ones that we see, which aren't too savvy, you mentioned DHL and Honda and Lloyds Bank. Is that a precursor to moving to Oracle core financials eventually. And I'm just wondering which of Oracle strength is really catalyzing that wave of replacements? Larry Ellison: Okay. So there are two lists. One, the first half of the list that I read and they're about equal sized lists where people that are already moved from SAP financials to Oracle financials. The second list where people that had partially moved to Oracle, but still were running SAP financials in some places. In other words, we don't consider it a complete win until we replace out. If we just sell procurement and supply chain and manufacturing and things like that, but they still run SAP financials we don't consider that a complete win. That's what we call our surround strategy. But once you start using our cloud products and compare that with SAPs on premise products, we think the vast majority of these companies that it started the journey, we'll finish the journey. And they'll want financials in the cloud, just like they have supply chain in the cloud, in procurement in the cloud. So yes, we expect company – we've already seen companies migrate off the second list. They buy procurement, they buy supply chain and they see, okay, I like that. And I'm going to buy financials. So yes, we expect all of those or excuse me, the vast majority of those customers to eventually standardize on Fusion Cloud ERP for everything. Mark Murphy: Thank you. Operator: Our next question is from Mark Moerdler with Sanford Bernstein. Mark Moerdler: Thank you. Thank you very much for taking my question and appreciate the additional color that Safra you gave on the call. I'd like to turn to OCI Gen2. We've been hearing about security concerns from consumer internet companies. To what extent has OCI security technology helped you in business with these companies and is consumer internet a big driver for OCI Gen2, also to be clear, this is not about TikTok, it's that all the other consumer internet company opportunities. Thank you. Larry Ellison: Yes. Well I think there are two things that are interesting about OCI. One on the security front. One is we believe security should be always be turned on and in other words, there is no light switch, security on, security off. We have these things called max security zones in OCI where you cannot turn security off and max security is always turned on. It's a safe place to go inside of OCI. No one has anything like this, where security is always turned on. You cannot turn it off. You cannot open up a link – a network link that puts your infrastructure and your data in jeopardy. That's one thing. So security is always on. The second thing is autonomy is very interesting, because the Oracle autonomous database, by the way, the Oracle autonomous database is not the only autonomous product we have. We have autonomous Linux that is the foundation of OCS, the foundation operating system inside of the OCI network. Oracle autonomous, Linux, Oracle autonomous database has no human labor associated with them. Okay. So everyone says, well, that's a huge cost saving. It is, but that's not the most important benefit. The most important benefit if there is no human labor, there is no human error. If there's no human labor, there's no human mission, there's no opportunity for an insider to corrupt the system. There's no opportunity for a user to misconfigure a system that creates a security vulnerability that will lead to the loss of data. So, we think one of the most attractive aspects of OCI, other than its high performance, low cost, all of that, everyone likes to pay less and they do with OCI. But we do a better job of securing your data than any other cloud vendor. We've seen that be the decisive feature in winning a lot of these deals with ISVs and end user customers. Mark Moerdler: I appreciate it. Thank you for the additional color. Operator: Our next question comes from Phil Winslow with Wells Fargo. Phil Winslow: Hi, thanks for taking my question. Congrats on a strong quarter. I just wanted to focus in on the license line it was up 4% as reported to be a flat constant currency off of what was actually the toughest comp for this fiscal year. Wondering if you can provide some context of sort of what is driving that particularly sort of relative to the strength that you are also seeing in the cloud side? Is this the Oracle database, is this the add-ons to the Oracle database? Any sort of more color there. And then also in particular in sort of in conjunction with the cloud, that'd be great. Safra Catz: So let me take that. So the Oracle database remains very strong and what's good about the Oracle database is you can also bring your own license to the cloud. So it's both on-premise and in the cloud can be used there. And it remains very, very strong. The installed base of the Oracle database continues to grow. And that is of course our central piece. Now, in addition, Java on-premise continues to do very well as more and more companies continue to invest in Java and trust Java for their own applications. And in addition, our vertical applications, some of our industry applications still require on-premise license for the customers’ use. We also have cloud services in many of these verticals, but especially in telecommunications, as many of the communications companies move to 5G, we are a very central part of their transition to 5G and need our license in those areas. So database tops, doing incredibly well, Java doing very, very well and our vertical applications. And then pretty much everything else of course as you know is offered just in the cloud. Phil Winslow: Perfect. Thank you very much for the color. Appreciate it. Operator: Our final question comes from Brad Zelnick with Crédit Suisse. Brad Zelnick: Great. Thank you so much for taking the question. And congrats as well on a great quarter. Larry, it's so great to hear every single one of those SAP wins, especially since investors think of SAP's customer relationships as being so deep. So clearly by displacing them in so many accounts, it speaks volumes to the quality of your product and trust that these companies place with Oracle. So, my question is this, why now, and why from a product perspective, you mentioned Gartner's take, but since Oracle has always competed on having better products, what have you been doing product wise that's enabled you to pull ahead of them like this and what do you need to continue to do product wise to remain ahead? Larry Ellison: So well we started 10 years ago to build fusion financials for the cloud to rewrite all – PeopleSoft ERP, JD Edwards ERP, and of course, Oracle E-Business Suite, we had these three separate on-premise ERP systems, and we decided a decade ago to rewrite all of that with the cloud. And SAP unbelievably, they just, I mean – and we did a very good job. We started a decade ago and we did, I think, a very good job redoing a big job, to say the least, redoing our ERP products for the cloud. That said, SAP chose not to rewrite their ERP products. Instead, they made a bunch of acquisitions. They bought Concur, they bought Ariba, they bought SuccessFactors, but they never – and we made some acquisitions also by the way, and others right now at other things. But we rewrote everything for the cloud. SAP instead, embedded their own database called HANA and focused on this new database and never really rewrote their ERP code for the cloud. I mean, it's just an unbelievable error. They worked on a new database and the, the thing we're competing with at so-called S/4HANA in the cloud, is what the SAP calls it, is not a cloud product at all. It is the 35-year-old ABAP, this is written in a programming language called ABAP. Oracle Fusion is written entirely in Java. And it's been entirely rewritten overload over the last decade. SAP stuff is literally 30 years old. The same that they've always had, that they now will host for you. So I would say we did a competent job rewriting for the cloud, SAP just entirely missed the boat. So SAP really is more responsible for our leadership position than we are. Again, they never rewrote their application for the cloud. It's unbelievable what's happened. And their customers are noticing. We offer a new release of our ERP system every 90 days. We offer new features and functions. That's how the cloud works. You are on the cloud, you get new features and functions, you are on this 90-day cadence. We give you more features and more capabilities every 90 days. SAP has nothing like that. It's not a cloud system. It's simply is okay, you can get the SAP S/4HANA and you can get it hosted by somebody, but they don't even have a cloud. They never built a cloud. That's what happened. Brad Zelnick: Thank you, Larry. Larry Ellison: It’s amazing. Ken Bond: Thank you, Larry. A telephonic replay of this conference call will be available for the next 24 hours. Dial-in information can be found in the press release issued earlier today. Please call the Investor Relations department with any follow-up questions from this call. And we look forward to speaking with you. Thank you for joining us today. With that, I will turn the call back to Erica for closing. Operator: Thank you for joining today's Oracle's third quarter of 2021 earnings conference call. We appreciate your participation. You may now disconnect.
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.
