Oracle Corporation (ORCL) on Q4 2021 Results - Earnings Call Transcript

Operator: Welcome to Oracle’s Fourth Quarter 2021 Earnings Conference Call. Now, I’d like to turn today’s call over to Ken Bond, Senior Vice President. Ken Bond: Thank you, Erica. Good afternoon, everyone, and welcome to Oracle’s fourth quarter and 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 many customers who purchased Oracle Cloud Services or went live on Oracle Cloud recently will be available from our Investor Relations website as well. On the call today are Chairman and Chief Technology Officer, Larry Ellison; and CEO, Safra Catz. Safra Catz: Thanks, Ken, and good afternoon, everyone. We are again reporting earnings earlier than last year. And with Fusion ERP, we are now filing our quarterly and annual financial statements faster than any other company in the S&P 500. This is possible because of the highly automated and machine learning-enabled system that helps us complete the accounting of financial transactions much more quickly. As you can see, we had a fantastic quarter with revenue nearly $200 million above my guidance. Q4 is really a story of every product, every region, and every metric exceeding expectations. The credit for the excellent full year results in the quarter goes to our global team of employees who supported our customers without interruption this past year. We were successful by continuing to deliver best-in-class products and services, both infrastructure and applications to help our customers in their digital transformation, many who’ve reinvented themselves in real time because of the pandemic. Now, the growth rates we are reporting today are entirely organic, reflecting true related growth across our product portfolio. Total cloud services and license support revenue for the quarter was $7.4 billion, up 8% in U.S. dollars, 4% in constant currency driven by Fusion, Autonomous Database, and our Gen2 OCI. Application subscription revenues were $3 billion, up 11% in U.S. dollars and 7% in constant currency. Larry Ellison: Thanks, Safra, and great job. Your team delivered a spectacular Q4. Clearly, our strategy to develop cloud applications with cloud infrastructure is now beginning to drive top line revenue growth to go along with years of consistent double-digit earnings per share growth. Our strategy is as easy to explain as it is technically challenging to implement. That’s a good thing. If it wasn’t hard to do, others would be able to do it. Our strategy and applications depends on Oracle becoming the world’s largest provider of cloud ERP systems. Then, building upon that strong ERP foundation, we’re going to expand into manufacturing, CRM and industry-specific applications. We are successfully executing this strategy. Oracle Fusion and NetSuite are now the world’s two most popular cloud ERP systems. SAP, the leader in on-premise ERP, never rewrote their ERP system for the cloud. This has caused hundreds of customers to abandon SAP and migrate to Oracle Fusion ERP. That’s already happened. But over the coming months, several more major banks and utilities and a lot of other companies will complete their Oracle Fusion implementation projects and go live on Fusion ERP. Oracle is taking massive amounts of share away from SAP ERP. It’s crucial to our future. Ken Bond: Thank you, Larry. Erica, if you could please now prepare the audience to poll for questions. Operator: Our first question comes from Mark Moerdler with Bernstein Research. Mark Moerdler: Thank you. And congratulations on to the team on a clean, nice quarter. I’d like to try to get some more color on the drivers of the success of the Oracle Cloud ERP solution. Can you give us some more sense of how much of Oracle Fusion ERP is from new Oracle ERP customers? How much is international versus the U.S.? How much is large enterprise? Where is the sweet spot? Any color you can give to get a sense of what’s really driving the growth, and how much of that is new to versus existing customers would be very helpful. Larry Ellison: Yes. This is Larry. There are more new customers than upgrades from on-premise ERP with Oracle Fusion. So, it’s probably about 60-40, in the 60s, it’s probably not quite two to one new customers, but most of the -- a majority of the business is coming from new customers. We’re also upgrading our installed base of the E-Business Suite and PeopleSoft and JD Edwards to Fusion. But again, more revenue is coming from new customers, customers, people like that. They are coming from our on-premise installed base. So, that’s really the trend. And we think that trend is actually going to accelerate in favor of new customers because the SAP migration phenomenon is relatively recent in the last 12 months -- over the last two years, but it’s really accelerating now in the last 12 months. So, we think that’s going to hold. So, another way to look at it is it’s a very -- as people migrate to Oracle Fusion ERP and smaller companies migrate to NetSuite ERP, these are both enormous businesses. Fusion ERP, I mean, it is certainly much bigger than $10 billion -- and NetSuite is bigger than $10 billion, Fusion is probably bigger than $20 billion as these businesses mature. Safra Catz: Yes, and as far as where it’s happening, I have to tell you, it is so broad-based. It is a worldwide phenomenon for us. Our Fusion, NetSuite are just chugging along. It was an incredible, incredible Q4, and Q1 looks enormous. So imagine, bookings are way up, and there’s just a lot of success. We have so many customers that have gone live. So, we have references from some of the largest companies in the world to really small or medium-sized companies that it’s pretty consistent, almost any prospect can find many companies just like it already being incredibly successful. And I think that, frankly, the pandemic taught many of our prospects and customers that moving quickly is really required these days. I think that folks used to think moving quickly is risky. I think, they really saw that they had to move to much more modern, flexible, digital businesses, and that we are the destination for them for the back-office without a doubt. Larry Ellison: I’d like to add one thing. We almost never lose a competitive ERP deal in the cloud, virtually never. Operator: And our next question is from Keith Weiss with Morgan Stanley. Keith Weiss: Excellent. Thank you, guys, for taking the questions, and congratulations on another year of 20% -- or a year of 20% plus earnings growth. And frankly, nice to see the stock starting to reflect the durability of earnings growth you guys have seen over the past couple of years. So, it’s nice to see that. I wanted to dig in a little bit on the infrastructure side of the equation, and in particular, OCI. Another quarter of, I think you said, 103% growth in OCI consumption. Can you dig in a little bit on sort of what are the workloads that are being done on OCI? Is this just all Oracle Database workloads? We know there’s a lot of those out there that just run so well on OCI, or is there a broader perspective of the big workloads that guys are bringing over, not looking for commentary on any specific customer, but just broadly what do you see in this space? Where do you guys do well? Where do you win with OCI? Larry Ellison: Okay. I mean, it’s really easy to remember. About half of it’s database, half of it’s everything else. So, I mean everything else -- I mean, the database, you understand. They’re lifting and shifting existing database workloads and developing new Oracle Database workloads on OCI. The other thing varies from things like Zoom who have moved over, but also in simulations, and we’re very, very good at running simulation software. So, almost -- so a large number of car companies have moved all of their PaaS simulations to the Oracle Cloud because we do it faster and cheaper than any other cloud. So, we have actually a pretty balanced portfolio right now where we have the Oracle database contributing to half of the workloads running on -- running in OCI and the other half is a variety of new customers doing new applications, not database related. Safra Catz: Keith, thank you. First of all, thank you for . The reality is that any customer that is really focused on performance, security like Larry mentioned, and cost, which happens to show up in many, many workloads, one of the areas we’re doing particularly well are ISVs who are obviously experts at running their workloads. They’re in the business and they are coming to us extensively because they’re really studying the benefits that we bring them. And of course, as I mentioned and as we never stop mentioning, security with what’s going on these days. You really have to be in a cloud that is basically obsessed with security while still giving you incredible performance at lower cost. I mean, once we are given a try, what happens is the workload comes, one workload comes, and it’s usually followed by many others. And so, it’s -- we’ve got a lot of momentum, let’s say. Larry Ellison: And I want to emphasize one thing, I said it, but I want to say it again, is there are new Oracle workloads being developed, especially in the area of genomics where there have been a number of new databases moved to Oracle and OCI that track things like the genetic variants of COVID-19. But, there are a number of these things, and you’ll see a whole series of announcements coming out where we’ve moved aggressively into health care, and one of the big new applications for our database is just -- is tracking the genomics of pathogens, and those databases are being developed right on Oracle Autonomous Database from scratch. Operator: Our next question comes from Derrick Wood with Cowen & Company. Derrick Wood: Great. Thanks for taking my questions. And congrats as well on a strong quarter. I’ve got one for Safra and one for Larry. Safra, in the past, you’ve talked about the potential revenue opportunity for the app space, if you were to migrate everybody to SaaS. So, I wanted to ask about the database side and in particular, Exadata. Can you give us a sense of what the revenue potential or uplift could be if you shifted all Exadata customers to Cloud@Customer? And how you feel about the strength of those motions heading into the new fiscal year? And then, for Larry, I mean, as you guys push to drive adoption of Autonomous Database, should we think of Cloud@Customer being the biggest vehicle for adoption, or what routes to market do you see working best? Safra Catz: Okay. Let me get it started, and then Larry can finish. So, Derrick, I’m glad you asked because when customers move from running their own dozen or 100 Exadatas, when it’s time for a refresh or a new set, we prefer that they go to Cloud@Customer and -- or have a dedicated region. However, just so that you know since you all focus on the numbers, you have to understand that when we sell hardware, regular way, we recognize all that revenue once it’s delivered, all that hardware is delivered. But, when we install Cloud@Customer, Exadata Cloud@Customer or dedicated region, we don’t recognize that revenue upfront. And so, -- and you don’t even see that that is all happening right now in our income statement and yet we’re still growing. So, as a general matter, first of all, it is much -- even though we believe we make around 3 times, maybe more, in revenue in the case of Cloud@Customer versus selling -- just selling the hardware can be anywhere from 3 to 5 times, the customer actually ends up spending less because we manage their entire estate. We update their databases, et cetera, depending on what services they’re using, and they get the benefit of always having capacity, always having the most up-to-date system, the most secure system and patched and fully managed by us. So, though, ultimately, they give us significantly more money 3 to 5 times as much, in fact, they end up spending much less to maintain that estate. So, for -- it’s kind of a win-win because we’re much more efficient, fully automated and save them the immense amount of labor it takes to run these very critical production systems. Okay. I guess, Larry’s question, what was it again, Derrick? Derrick Wood: It was around Autonomous Database and what’s kind of the route to market to drive adoption, is Cloud@Customer really the biggest vehicle, or are there other routes that are working well too? Larry Ellison: Well, the Autonomous Database only runs in the cloud. It does not run on-premise. It doesn’t run on -- even at the Exadata appliance. It runs on or public cloud. So right now, the public cloud is the most popular route for Autonomous Database and Cloud@Customer is becoming more popular as people scale up, so. But right now, the most popular way to use Autonomous Database is in the OCI public cloud. Operator: Our next question is from Kirk Materne with Evercore ISI. Kirk Materne: Thanks very much. And thanks for taking the question. I was wondering, Safra, could you just talk about sort of the performance in Europe this quarter? It looks like it bounced back nicely. And I guess, along those same lines, can you just talk about cloud adoption on certain just maybe what you’re seeing in the -- I assume you guys are probably leading the charge. But what you’re seeing in other regions just following maybe close behind it? Thanks. Safra Catz: Sure. So, first of all, I have two new leaders in Europe, Middle East, Africa. I have a very refreshed and new and really successful management team in Europe. And they are pretty much firing on all cylinders. It is extremely broad throughout Europe, Middle East, all of EMEA. tell you incredible strength worldwide. Latin America doing phenomenally; Japan doing phenomenally; as a result, JPAC doing very, very well; and of course, led by North America. I have to tell you, it’s been an amazing year. It was a phenomenal quarter, but truly an amazing year worldwide. And I’m more than satisfied. I am delighted by the results of the team. And for me, this was my first full year with the field. So, I really applaud the team for doing a spectacular job worldwide. Operator: Our final question comes from Raimo Lenschow with Barclays. Raimo Lenschow: Hey. Thanks for squeezing me in. Safra, the one thing that was interesting that we didn’t really talk that much about is your RPO and RPO growth. Can you talk about it again? Because like the growth there is actually even better than I see on the revenue line. And that, to me, suggests that this wasn’t just Q4. It looks like things are coming together broad-based in the coming quarters as well. Thank you. Safra Catz: Yes, Raimo, you are so right. Q4, but really, it’s just coming together all around, the RPO. I’m glad really, really strong bookings are -- were truly enormous. Obviously, they don’t show up in the income statement right away, but they -- the future is just so positive. And you might have heard me, I was hinting to that in my comments. And one of the reasons we’re so comfortable leaning into our investment because we really want to make sure we’ve got the capacity to take on the enormous amount of bookings that are flying in and that both were during the year and are going on line, and so, will be recognized over this next year and beyond. But, there is just an enormous backlog for us of customers that are going live and that will start consuming and we’re very optimistic. So, thank you so much for asking, and I’m glad you noticed that. Raimo Lenschow: Thank you. Okay. Congrats. Ken Bond: Thank you, Safra. If there are any questions coming out of this call, please feel free to call the Investor Relations hotline. Otherwise, I’ll turn the call back to Erica for closing. Operator: Thank you for joining today’s Oracle’s fourth quarter 2021 earnings conference call. We appreciate your participation. 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.