Oracle Shares Down On Q3 Earnings Miss, Mixed Q4 View; Sees Long-term Growth

(RTTNews) - Shares of Oracle Corp. declined around 3 percent in the extended trading on Monday on the NYSE after a 4 percent drop in the regular trading, and is currently down around 2 percent in pre-market activity, after the tech major's third-quarter earnings missed the market estimates despite an year-over-year growth on continued demand for AI.

The company also issued fourth-quarter earnings view in its earnings call, expecting between a decline and a growth from the prior year, while revenues are projected to be higher. Oracle also announced higher quarterly cash dividend.

In its earnings call, Oracle Chief Executive Officer Safra Ada Catz said, "We remain very confident and committed to total cloud infrastructure revenue for fiscal year 2025, growing faster than the 50 percent reported last year. And it will be even faster for fiscal year 2026, likely a lot faster. Our confidence in meeting our $66 billion revenue target for FY '26 is now stronger than revenue -- than ever and represents around a 15 percent growth rate. And more importantly, I now expect that our fiscal year '27 growth rate will be around 20 percent, which is even higher than I previously guided."

Looking ahead, for the fourth quarter, the company projects adjusted earnings per share to grow between negative 1 and positive 1 and be between $1.61 and $1.65 on a reported basis. In constant currency, adjusted earnings per share would grow from 0 percent to 2 percent and be between $1.62 and $1.66.

In the prior year's fourth quarter, the company's net earnings came in at $1.11 per share on a reported basis and $1.63 per share on an adjusted basis.

Total revenues for the quarter are expected to grow from 8 percent to 10 percent on a reported basis, and 9 percent to 11 percent in constant currency. Total cloud revenue would grow from 24 percent to 28 percent in constant currency.

Further, the company projects that the $130 billion sales backlog in its third quarter will help drive a 15 percent increase in Oracle's overall revenue in its next fiscal year beginning in June.

Oracle said it signed sales contracts for more than $48 billion in the third quarter, which pushed the firm's Remaining Performance Obligations, or RPO, up 62 percent to over $130 billion.

The company has signed cloud agreements with several world leading technology companies including OpenAI, xAI, Meta, NVIDIA and AMD. RPO is expected to continue to grow rapidly, as the firm looks forward to signing its first Stargate contract, aiming to expand both its AI training and AI inferencing businesses in the near future.

Oracle Chairman and CTO, Larry Ellison added that the company is on schedule to double data center capacity this calendar year. Database MultiCloud revenue from Microsoft, Google and Amazon is up 92 percent in the last three months alone. GPU consumption for AI training grew 244 percent in the last 12 months.

With the expectation of enormous demand for AI inferencing on customers' private data, Oracle said it is connecting OpenAI ChatGPT, xAI Grok and Meta Llama directly to Version 23ai of its Oracle Database with advanced vector capabilities. The new product, called the Oracle AI Data Platform, makes it easy for customers to use any of the world's leading AI models to analyze all of their private data—while keeping all their data private and secure.

Oracle also announced that its Board of Directors declared a quarterly cash dividend of $0.50 per share of outstanding common stock, reflecting a 25 percent increase over the current dividend of $0.40. The increased dividend will be paid to stockholders of record as of the close of business on April 10, with a payment date of April 23.

In its third quarter, Oracle's profit increased from the same period last year with strong revenue growth, but missed the Street estimates.

The company's net income grew 22 percent to $2.94 billion or $1.02 per share from prior year's $2.40 billion or $0.85 per share.

Adjusted earnings were $4.23 billion or $1.47 per share for the period, compared to $3.98 billion or $1.41 per share last year. Analysts had expected the company to earn $1.49 per share.

Operating income was $4.36 billion, up 16 percent year-over-year, and adjusted operating income was $6.2 billion, a growth of 7 percent.

The company's revenue for the period rose 6 percent to $14.13 billion from $13.28 billion last year. Revenues were 8 percent higher in constant currency.

Cloud services and license support revenues were up 10 percent year-over-year to $11.01 billion, and accounted for 78 percent of total revenues, up from 75 percent last year.

Meanwhile, cloud license and on-premise license revenues were down 10 percent from last year to $1.13 billion.

In the quarter, Cloud Revenue climbed 23 percent year-over-year to $6.2 billion, and Cloud Infrastructure revenue grew 49 percent to $2.7 billion. Cloud Application revenue of $3.6 billion, went up 9 percent, and Fusion Cloud ERP revenue as well as NetSuite Cloud ERP Revenue climbed 16 percent each.

Hardware revenues were down 7 percent, and services revenues dropped 1 percent.

On the NYSE, Oracle had closed Monday's regular trading at $148.79, down 4.11 percent. In the extended trading, the share lost 3.2 percent further.

In pre-market activity, the shares are trading at $146.08, down 1.82 percent.

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