Oracle Corporation (ORCL) on Q1 2023 Results - Earnings Call Transcript

Operator: Good afternoon. Thank you for standing by. Welcome to Oracle's First Quarter 2023 Conference Call. It's now my pleasure to hand today's conference over to Oracle's Senior Vice President, Ken Bond. Ken Bond: Thank you, Josh. Good afternoon, everyone, and welcome to Oracle's first quarter fiscal year 2023 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 CEO, 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. 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 from 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 will 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. We had an excellent quarter with total revenue growing 23% in constant currency and beating the high-end of our guidance. We also had a great organic quarter with total revenue growing 8% in constant currency. This was on top of a fantastic Q4 last quarter. And as you can see from the numbers, we continue to get excellent returns on the investments we've been making over the last few years in products, infrastructure and our sales organization. We are seeing company-specific and product-specific momentum. We continue to expect organic revenue growth and our cloud business will accelerate substantially in FY '23. The currency headwind this quarter was much higher than the 3% headwind that was present when we gave guidance. It was actually 6 points, even though due to rounding, it may look like 5%. And that's a currency headwind to total revenue, it was in fact 6 points. And yet we still exceeded our forecasts on a reported basis and we beat our constant currency revenue forecast by $200 million. We saw similar currency headwinds in EPS which had an $0.08 negative effect much worse than the $0.05 headwind present at the time of guidance in June. It's because of the significant and volatile swings in currencies, that I always discuss our results using constant currency growth rate, and so that you have a clear view of the business as we manage it. Now to the numbers and there's a lot here. I'm going to go over the revenue results, including Cerner, and then some of the results, excluding Cerner, which many of you are focused on. I hope you're pleased with our expanded disclosure this year. So total cloud revenue that’s SaaS and IaaS including Cerner, was $3.6 billion, up 45% in USD and up 50% in constant currency with IaaS revenue, a smidge under $900 million and SaaS revenue at $2.7 billion. Total cloud services and license support revenue for the quarter was $8.4 billion, up 20% in constant currency driven again by fusion autonomous database and our Gen2 OCI. Application subscription revenues, which includes support were $4 billion, up 37% in constant currency. Again, Q1 cloud application revenue that’s SaaS was $2.7 billion, up 43% in USD, up 48% in constant currency. Infrastructure subscription revenues, including support were $4.4 billion, up 7% in constant currency. And to be clear, that's actually 7% organic growth with no contribution from Cerner. Q1 cloud infrastructure or IaaS revenue was $0.9 billion, up 52% in USD, up 58% in constant currency, again, with no contribution from Cerner. Now, the revenue results, excluding Cerner. Total cloud revenue that's IaaS plus SaaS, excluding Cerner was up 29% in constant currency at $3.1 billion. Organic revenue growth for both IaaS and SaaS was significantly higher than last quarter. Application subscription revenues, excluding Cerner were up 12% in constant currency. Our strategic back office cloud applications now have annualized revenue of $5.8 billion and grew 33% in constant currency, including fusion ERP, which was up 38%. NetSuite ERP up 30% and Fusion HCM up 26%. That means that SaaS revenues, excluding Cerner were $2.2 billion, up 20%. Infrastructure cloud service revenue was up 58% in constant currency. Excluding legacy hosting services, infrastructure cloud services grew 70% with an annualized revenue of $3.2 billion, including OCI consumption revenue, which was up 103%. Cloud@Customer consumption revenue, which was up 92%, and Autonomous Database, which was up 56%. And it's not only that our growth rates are higher than our hyperscale competitors, maybe you'd expect that because we're the newest and thus the smallest, but our growth rates are increasing as we get bigger. Our second generation cloud launched after our competitors first generation cloud, and so we've been able to architect it more performantly, more securely and more sustainably. As a result, as more companies test our cloud, they discover how much better it is on price, security, performance and sustainability. In addition, we now have cloud regions in more countries and cities than AWS and Azure, giving our customers more choices for their sovereign data. And finally, many of our customers appreciate how flexible our service and business model is. All of this is amazing our customers, and I can't wait to share the stage with some of them at Oracle CloudWorld in October. Now, to license revenues, including Cerner, were $904 million, up 19% in constant currency led by database options and Java. Total database revenues were up 3% in constant currency. So all in, total revenues for the quarter were $11.4 billion, up 23% in constant currency, excluding Cerner revenue of $1.4 billion, organic revenue was up 8% in constant currency. In addition, I want to point out that since we no longer operate in Russia, this negatively affected revenue by over 1 point of growth. Had we still, had we not left, actually, our growth rate would be over 9% this quarter. Operating expenses were up 34%, mainly due to adding in Cerner's expenses, and the mix of our business. The gross margin for cloud services and license support was 81% and the associated gross profit dollars grew 15% with Cerner and 7% excluding Cerner. In fact, the gross margin percentage on IaaS increased dramatically in the quarter. Non-GAAP operating income was $4.5 billion, up 10% from last year. And I expect that we'll see strong operating income growth again in Q2. The operating margin, including Cerner was 39%, which is lower than in the past, since we only just began to integrate Cerner in the quarter. As we drive Cerner and its profitability to Oracle standards, and continue to benefit from economies of scale in the cloud, we will not only continue to grow margin dollars, but also grow margin percentages significantly. The non-GAAP tax rate for the quarter was 19.4%, slightly above the guidance rate and non-GAAP EPS was $1.03, unchanged in USD and up 8% in constant currency. GAAP EPS was $0.56, down 34% and down 26% in constant currency, that's our GAAP EPS. Over the last four quarters, operating cash flow was $10.5 billion and free cash flow was $5.4 billion with capital expenditures of $5.2 billion. For the quarter, operating cash flow was $6.4 billion and free cash flow was $4.7 billion with capital expenditures of $1.7 billion. At quarter end, we had $11.2 billion in cash and marketable securities. In the short-term, deferred revenue balance was $10.5 billion, up 11% in constant currency. The remaining performance obligation or RPO balance is $16.7 billion, up 62% in constant currency due to strong bookings as well as the addition of Cerner. However, I would note for you all that the organic RPO growth accelerated to 22% in Q1 from 17% in Q4, approximately 49% of total RPO 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 and prudent use of debt and our dividend. This quarter we repurchased 7.5 million shares for a total of 559 million. In addition, we paid out dividends of $3.4 billion over the last 12 months, and the Board of Directors today declared a quarterly dividend of $0.32 per share. Our fundamental principle is to grow non-GAAP EPS, while substantially increasing cloud revenue. And given our increasing confidence, we will continue to prudently invest as their strong demand for our cloud services. Now, let me turn to my guidance for Q2, which I will provide on a non-GAAP basis. Now we are assuming the currency exchange rates remain the same as they are now. That's not a prediction, that's just giving it to you as a translation as it currently is. In that case, currency should have a 5% to 6% negative effect on total revenue, and at least a $0.07 negative effect on EPs in Q2. As I say every quarter, the actual currency impact may be different by quarter end. My EPS guidance for Q2 assumes a tax rate of 20.5, which is up from 19.2 last year. However, one-time tax events could cause actual tax rates for any given quarter to vary. So now to guidance. Total revenues for Q2, including Cerner are expected to grow from 21% to 23% in constant currency, and are expected to grow from 15% to 17% in USD. Total cloud growth, again including Cerner, is expected to grow from 46% to 50% in constant currency, 42% to 46% in USD. I expect that total cloud growth for the fiscal year excluding Cerner will be above 30% in constant currency. Non-GAAP EPS growth is expected to grow between 1% to 5% and be between $1.23 and $1.27 in constant currency, again due to currency headwinds, non-GAAP EPS is expected to decline 1% to 5% and be between $1.16 and $1.20 in USD. As I've said before, Cerner will be accretive to earnings this year, including in Q2. And with that, I turn it over to Larry for his comments. Larry Ellison: Thank you, Safra. Last quarter, Microsoft and Oracle announced that we had built a high speed interconnect between Microsoft Azure Cloud and the Oracle Cloud. The purpose of this Multi-cloud interconnect is to enable Azure customers to directly use the very latest Oracle Database technology, even if their application is running in Azure. In other words, customers can now use any combination of Microsoft and Oracle Cloud services together as if they were in one cloud. That was last quarter. This quarter, Oracle is making the latest version of our mice MySQL HeatWave database available in Amazon's AWS cloud. Multiple published customer benchmarks have shown that MySQL HeatWave delivers 7x better performance than Amazon Redshift. 10x better performance than Snowflake and up to 10x higher throughput than Amazon's own MySQL database called Aurora. The Multi-cloud era has begun. Customers are already buying applications and cloud infrastructure from several different providers, including Microsoft, Amazon, Salesforce, Oracle and others. Our job is to give our customers the ability to choose application and infrastructure technology from multiple clouds and then have those different clouds coexist and interoperate gracefully. Multi-cloud interoperability is an important step in the evolution of cloud computing. Multi-cloud interoperability is one of the reasons our infrastructure business is booming, growing over 50% in U.S dollars, and almost 60% in constant dollars. We expect Oracle's total cloud business to exceed a $20 billion annual run rate next year. Now I'll highlight some of our big new infrastructure wins in Q1. Overall, we added about 1,000 new paying customers for infrastructure in Q1. Let's start off with NVIDIA. NVIDIA chose OCI to build their SaaS products for data scientists for machine learning and inferencing along with moving their entire health care platform called Clara to OCI. Mosaic has developed a state-of-the-art neural network on OCI, and they picked OCI because OCI outperformed all of the other clouds when running machine learning and AI. The Avis car rental company is moving their entire Oracle estate, along with their Oracle applications to OCI. The Chicago public schools are closing data centers and migrating their Oracle estate to the Oracle Cloud. Tanium, a leader in cybersecurity chose Oracle Cloud Infrastructure to help safeguard their customers with industry-leading security. OCI deployment will be a part of its multi-cloud strategy and delivering its SaaS platform Tanium as a service. Cigna, a health care company is migrating their existing Exadata on-premise to the Oracle Cloud. Additionally, their SaaS ERP system is being integrated with Oracle Cloud Digital Assistant. Tennessee and Oklahoma are both new government cloud customers. This was the first group of customers were all from North America. I just finished my list beginning with NVIDIA and North America and Tennessee and Oklahoma in North America. I'm now going to move to wins in LAD. AT&T in Mexico is the first case of any telco to move their entire Amdocs stack to a cloud and they're moving it their Amdocs stack to OCI's New Mexico cloud region. Avianca, one of the largest airlines in Latin America will move all of their workloads to OCI. Entel, another telecom, in fact, the largest telecom in Chile is now moving all of their critical workloads from AWS to OCI. Banco Digimais, a fintech bank in Brazil is moving their entire on-premises VMware estate to run in OCI 100%. Serasa Experian, a financial services company is moving AI training for OCR biometrics and facial recognition to OCI. Bionexo, another infotech company -- in the health care business, serving 1,500 -- 15,000 hospitals and clinics is migrating their data lake and their data warehouses from Amazon Web Services to OCI. Santander, a large bank is moving all of their databases from mainframes and Oracle databases all to the Oracle Exadata Cloud Service. Unimed, also a health care, a company health care insurance company is beginning the migration of all of their applications and database to OCI. Sky Mexico, the largest satellite paid TV producer in Mexico will move all of their data lakes and all of their data warehouses to OCI in the New Mexico region. That's Latin America. In JPAC, and maybe this is the most interesting customer I'll talk about, NRI, Nomura Research, is continuously expanding their dedicated cloud region. In Japan, they've just added a second data center NRI has. The Oracle Cloud in Japan, the NRI Oracle Cloud in Japan already runs 50% of all transactions on the Tokyo Stock Exchange. That's a mission critical application. ICI Bank Financial Services is the new customer in JPAC, Japan, Asia Pacific. Hitachi construction in Japan is moving their manufacturing, their critical manufacturing systems to OCI. timing technology, an infotech company is the new customer in Asia Pacific. Daiichi Sankyo is the first big pharma in Japan that is moving their database -- their Oracle Database workloads to the cloud. Pacific International Lines, the big transportation company is the new customer in Asia Pac. Li & Fung, a trading company, another new customer, we had -- again, eventually, we had a 1,000 new customers this quarter in OCI. another fintech company is again another big new customer for us in Asia Pacific. H2O Retailing is moving their entire VMware on-premise VMware estate to OCI. They're one of the largest retailers in Japan. Again, Asian Development Bank is the new customer in Asia Pac. Vision is an infotech company new customer. We have, again, a bunch of new customers in OCI all over the world. That's JPAC. Now let me move to EMEA. Dojo, a financial services company chose Oracle Cloud Infrastructure for their payment platform because their benchmark showed that the Oracle Cloud OCI is more secure and has better availability than the competition. Al Rajhi Bank, the world's largest Islamic Bank is in the process of moving all of its applications and databases to the Oracle Cloud. Unilever is integrating a few -- their Oracle Fusion Applications with the autonomous database to build a next generation super secure, super agile platform for Unilever. Atlantic Financial Group, an infotech company, hosts core banking functions on the Oracle Cloud Infrastructure, which to many of their banking customers. Centrico , an infotech company is moving all their workloads from their old data centers to a combination of OCI using OCI's multi-cloud services to access other clouds. Mio , big telephone company moving over 300 Oracle Databases to the Oracle Exadata cloud. , the government agency migrating all databases off their IBM mainframes and UNIX systems to the Oracle Database and to the Oracle Cloud. And I'll close with the U.K Home Office, the department is moving to the Oracle Gen2 Cloud Infrastructure with a focus on dramatically improving both security and reliability. With that, I will turn it back over to Safra. Ken Bond: Thank you, Larry. Josh, if you could go ahead and queue up the audience for questions. Operator: Your first question comes from John DiFucci with Guggenheim. Your line is open. John DiFucci: Thank you. Hi, Safra and, Larry. A little surprised to see your strong results here when most software companies, other than some of the pure security names really faltered some against the macro backdrop. And frankly, you just didn't hear. But I want to focus the question on one area that we've gotten the most questions on since we launched coverage, and that's on organic constant currency cloud services growth. It looks like you came in above the high-end of your guidance for the quarter and you reiterated Safra that you expect greater than 30% growth for the year, which doesn't seem like a stretch like it did when you gave that first. We understand the way a subscription model works, but we obviously don't see everything that you see. Can you give us some more color around what's driving the results this quarter and what gave you the confidence in this outlook for cloud services. Was it previously contracted revenue that's just starting to ramp up with an expected increase in consumption or something else or all the above? Safra Catz: So let me tell you, it is all of the above. But let me tell you what's really happening down at each customer level. When customers try us for some reason whether they're using Fusion and they start using OCI for their own applications, or they hear really from word of mouth and from really a need to run some of their Oracle workloads or otherwise, when they give a try to Gen2 OCI or to Fusion, for that matter, what they find is that it is phenomenal. Our Gen2 cloud is so much better than what they're used to, and is so much more flexible, and can be much more local, gives them so many more opportunities to really match to their own needs. But they're overwhelmed by the technical capabilities of our cloud and how great it is. So what happens is, they may start small, and then they accelerate in their consumption. And they sign larger and larger and more significant contracts. As you see in our RPO, there's a lot already contracted and that's without us adding a single additional customer or expanding the use. But we have, as I said so much company-specific or product specific momentum that as customers discover us, use us, give us a chance they become honestly overwhelmed by our capabilities and how much less expensive, more flexible, more secure and how differently we’re architected such that we're also more sustainable for them. And so it's just incredible company-specific, product specific momentum. And nothing really has to happen for us to continue to do very, very well here. And whether they're trying to save cost or expand growth, we help them do that in an incredibly flexible way and super, super cost competitively for them. Larry Ellison: Yes, let me just add one sentence to that. We are the only infrastructure company that builds enterprise scale applications. As a result of building these enterprise scale applications, we have made our infrastructure much, much better. So we not only provide infrastructure and sell infrastructure, we consume the infrastructure ourselves. I think that gives us certain insights as to what we need to build at the infrastructure layer to make our application secure, reliable and so on. And easy to use and make people productive. That's why -- I think that's why what customers are discovering when they come to our cloud, that they're more productive, the system runs faster, it's more secure, it's easier to use, all of that. And that's what gives us confidence that we can build the next generation of health care applications, because we do both. We do both applications, enterprise applications and infrastructure. And we're the only one. John DiFucci: So it sounds like that the expansion within your customer base of cloud services is becoming or has become more predictable. And that makes a lot of sense. Thank you. Ken Bond: Thank you, John. Next question, please. Operator: Your next question comes from the line of Phil Winslow with Credit Suisse. Your line is open. Philip Winslow: Hey, thanks for taking my question. Congrats on another strong quarter of organic growth. Now obviously Oracle has been delivering accelerating growth in its infrastructure and database businesses for multiple quarters now. Safra, can you give us some more color on just what the drivers are behind this and how sustainable they are, be it BYOL, database add-ons, Autonomous Database, et cetera. And then a question for Larry. Obviously, the expanded partnership with Azure announced in July received pretty universal positive feedback. And you just announced today that Oracle's MySQL HeatWave will be available on AWS. How do you think about these multi-cloud partnerships impacting the already positive existing momentum in your database business going forward? Safra Catz: Larry, why don't you go first, and then I'll fill in if you've missed any. Yes. Larry Ellison: Okay, boss, I will do that. Again, multi-cloud -- I think one of the issues I know a lot of people for years have been concerned about can Oracle sustain its leading market share in the database business? And I think what is clear is if our databases are available in multiple clouds, I think then the answer is clearly yes. If our database is not available in multiple clouds, then it's an interesting question whether we can and maintain it just in our own cloud. We've decided to make our best and greatest technology available in multiple clouds. And that gives customers choice, they can use it in OCI. They can use MySQL HeatWave at AWS. They have choices, but they will be able to choose between, let's say, Amazon's Aurora or Oracle's MySQL HeatWave. They will be able to choose between Snowflake or the Oracle Autonomous Database. And I think as long as we're available in multiple clouds, we're going to be very strong, very, very -- and very, very competitive against these other companies and these other technologies. Safra Catz: And the answering for you on how is the Oracle database doing? Well, you saw we had an amazing Q4. And in Q1, again, the Oracle database is what people choose if they have real work to do. It's very secure. It's very performant and they know it has so many capabilities that you don't have to have 16 different databases to get a complicated job done. You can do everything with it in different ways. And the database options are continued to be acquired. Many more customers still want enterprise agreements, so they can BYOL, bring your own license to the Oracle Cloud. Our technology remains unbelievably strong with Java. And so the business overall, our tech business remains incredibly strong, even though it's enormous. And for many, many of the reasons I think there was a period a few years back, where folks were thinking they would try lots of other things and things that were maybe more " fashionable". I think they've realized that actually getting your job done securely, performantly, sustainably, and also really least expensive is to actually use our products to do that. And so they've been doubling down and committing and bringing those workloads to the Oracle Cloud again, propelling just incredible momentum, whether it's Cloud@Customer, dedicated regions or our public cloud. Ken Bond: Thanks, Phil. Next question, please. Operator: Your next question comes from the line of Mark Moerdler with Bernstein Research. Your line is open. Mark Moerdler: Thank you very much for taking the question and congratulations on the strong quarter. Larry, Safra, historically, in increasingly difficult economic conditions, organizations focused on what drove revenue growth or immediate savings and thus products like Salesforce automation, with similarities received funding while back office projects were delayed. What is different this time, both from a ERP point of view and an HCM point of view? What's going to drive the sustained growth and strength that you're expecting in Oracle strategic back office? Thank you. Safra Catz: Sure. So let me start by since I'm also the Principal Financial Officer, if I would say that in another company, I'd be the one making the decision to buy fusion ERP, and Fusion HCM. And what is absolutely clear, is that saving money in the back office is basically automatic when you use our products, when you move from, from especially from our competitors products, which are so expensive to maintain and run. When you move to fusion, you can save so much in your back office, that you can use that money to invest in things that help you extend the differentiation of your business. Now, today's the 12 of September. In fact, I signed off with our auditors on Friday, but we don't do our earnings on Friday. So we had to wait all the way till Monday. Now no other companies report on the 9th or the 8th. In fact, most companies were reporting their July quarter on last week. And here we are announcing an August quarter. Well, what does that have to do with costs? Well, I can tell you that when you are in a position to know your results, and to announce them, and to file your earnings with the Securities and Exchange Commission, you've not only saved time, you've saved millions in process dollars, and in the way you run your business. And I just want to point out that we were able to do this after acquiring in the quarter, Cerner by putting their data from their old system into Fusion and consolidating it in fusion. So we actually believe that one of the most important ways to drive business transformation is to move to a much more streamlined cloud product than running old back office systems. Larry Ellison: Let me just add one thing. I’m sorry, let me add one thing, which is Safra addressed the issue of using modernizing back office to save money. Let me tell you another way, you can save money we -- I personally have been talking to some of Amazon's most famous brands that are running at AWS. And the AWS bill is getting very large, and they can save a huge amount of money by moving to OCI. And we expect next quarter, we'll be announcing some brands and companies moving off of Amazon to OCI that will shock you. Mark Moerdler: I'll stop there. Amazing. Ken Bond: Thank you, Mark. Next question, please. Operator: Your next question comes from Derrick Wood with Cowen and Company. Your line is open. Mark Moerdler: Great. Thanks. And I'll echo my congratulations. And Larry, thanks for all the color on the OCI wins. I was hoping to get an update on your go-to-market strategy for OCI when it's clearly becoming a more critical growth driver for you guys. Is there a dedicated Salesforce? Are you doing more bundling of OCI with other offerings? Just hoping to get an update on how you're going to market and what kind of resources you're putting around us? Larry Ellison: Yes, because with 58% growth, it certainly seems like you're now gaining share in the cloud infrastructure market. It's a big market to go after. So any color on that would be helpful. Safra Catz: Let me start, Larry. Absolutely. Larry Ellison: Okay, so. … Safra Catz: So, one of the enormous changes we made in the past year, year or so euro2 is that we've invested in a lot more engineering talent in the field to help our customers bring over workloads. And once we've shown them how to do it, and the enormous benefit they get by doing it. This is the Ultimate Sales accelerator, because there's nothing like the customer who realizes that our solution is just so much better and so much less expensive for them. And you have to do that often, by let's say, priming the pump by sending engineers, field engineers who can help the customers move those workloads and that's really propelled what's been going on in our OCI Cloud. Larry, you go ahead. Larry Ellison: Yes, I think exactly what Safra said, and I'll add what I just repeat what I said earlier. The amount of money, these huge companies, these very famous companies spend with Amazon is kind of staggering. I mean, everyone assumes, hey, I move to the cloud, and I'd save a lot of money. It depends which cloud you move to. And Oracle is much less expensive than the competition. One, partially because we're faster, which time is money when you're when you're paying by the hour. So again, I'm going to repeat, we're talking to the most famous brands that are running at Amazon, and some of them are going to be moving very soon. Mark Moerdler: Exciting. Thank you. Ken Bond: Thanks, Derrick. Next question, please. Operator: Your next question comes from Brad Zelnick with Deutsche Bank. Your line is open. Brad Zelnick: Excellent. Thank you, and congrats on the solid execution. Larry, we've heard of some very exciting things happening with Cerner pretty quickly after the deal just closed with some hospital networks, we heard from significantly expanding their existing contracts. Can you talk about the unique value you're able to deliver now that Cerner is a part of Oracle and the broader expansion opportunity that you see ahead. And if I could just sneak in one for you as well, Safra $1.7 billion in CapEx and q1 is a pretty big number. And I know very well that you don't spend frivolously What can you tell us about the big step up here? Larry Ellison: Okay, I'll go first, let's have a bug with 1.7 CapEx is there's just so much demand. Safra mentioned we have more data centers in more countries and in more cities than either Amazon, or AWS. And we're expanding because the demand is there. We expect to be growing in the 50% range for cloud services. And that means we're going to be -- we are going to be half to -- half to be adding a lot of data center capacity and opening a lot of new data centers and we're doing that. The fact that we're running in Oracle Cloud data centers running half of Tokyo Stock Exchange, as the other cloud vendors, how many stock exchanges they run. The -- our stuff is very secure, it's very reliable, it's very performance, it's very, very cost effective. And therefore we have huge opportunity, therefore, we're spending the money to expand. We have a huge opportunity for growth, and we're not going to miss it. But we're still going to be as you know, Safra is very cautious. We're very, we're always very cautious. We pay a lot of attention to profitability. But we also have to pay attention to the top line, as well as the bottom line and take advantage of this growth opportunity. And I think there was a second part of the question that . Brad Zelnick: Cerner, he asked you all about Cerner. Cerner. a big other part. Yes, one of the things I think that we don't really talk about, but I alluded to the fact that we both build applications, and we run them with on our infrastructure. The tools we use for building applications, our latest generation of tools, are the autonomous database very different than from all the Oracle databases or any other database that came before. There are no DBAs. There is no human labor associated with running the Oracle Database anymore. So there can be no human error. The costs are so much cheaper. Our own internal cloud, our own cloud OCI, uses autonomous database to run all the control systems, because claim doesn't want to hire a lot of DBAs to lower costs. Also, he doesn't want any errors of commission. It's much more reliable than when you have human beings driving the car. We use that for the next generation of Cerner, the Oracle Autonomous database. We pair that with an all new application development tool called Apex , which is a low code tool. So our newest applications, our very newest applications that we were built, we are building, we're building any autonomous database with Apex, which allows us to do stuff that would have taken three or four years in less than a year. So we expect to have our first pretty complete new Cerner health management product out within 12 months, which I think is going to, again, it's something we never could have done with the previous generation of databases or the previous generation of application development tools. But all of that has changed. We have these phenomenal low code tools. I mean, one of the things about the low code tool is you almost -- you don't have to do security audits because security is built into the tool. You can't build an insecure applications using Apex tolerance is built into the tool, if the application should fail, it's a stateless application. So it immediately failover into another data center in a millisecond and keep running, no one will even know about the failure. So our new generation of application development tools is going to enable us to modernize the server -- the Cerner technology at a rate that would be inconceivable a couple of years ago. Brad Zelnick: Amazing. Thank you. Ken Bond: Thank you, Brad. That does appear to be our last question. So a telephonic replay of this conference call will be available for 24 hours on our Investor Relations website. Thank you for joining us today. And with that, I'll turn the call back to Josh for closing. Operator: This does conclude today's conference call. Thank you very much for joining. 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.