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Oracle sees strong third quarter on cloud strength, share rise

[BENGALURU] Oracle Corp on Monday forecast current-quarter profit above estimates after growth in its cloud services and license support unit helped the business software maker surpass Wall Street expectations for the second quarter.

Shares rose 5 per cent, with the company saying that excluding fluctuations in exchange rates, it expected third-quarter adjusted profit to be between 86 cents and 88 cents per share.

Analysts on average were expecting 84 cents, according to IBES data from Refinitiv.

Revenue at its cloud services and license support unit, its biggest, rose 2.7 per cent to US$6.64 billion and beat analysts' estimate, as more companies shifted to cloud computing from the traditional on-premise database model to cut costs.

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Oracle's in June created a new revenue reporting structure that merged its cloud and software license businesses, which analysts have said gives little insight into the standalone performance of its cloud unit.

Oracle is a late entrant to the rapidly growing cloud-based software business, but has aggressively stepped up its efforts to catch up with rivals such as Workday Inc, Microsoft Corp and Salesforce.com Inc.

"Oracle's growth in cloud services and license support of just 3 per cent appears to be contradicting the strength in the overall cloud market," said Daniel Morgan, senior portfolio manager of Synovus Trust Co, which hold 152,500 shares in the company.

Last month, Workday reported a 35 per cent jump in cloud subscription revenue, while Salesforce's flagship product Sales Cloud grew 11 per cent.

"Oracle is still dragging behind other old line enterprise software players like Microsoft in its transition to becoming a top cloud company," said Morgan, whose firm also hold shares in Salesforce and Microsoft Corp.

The company's net income rose to US$2.33 billion, or 61 cents per share, in the second quarter ended Nov. 30. Excluding items, the company earned 80 cents per share, beating the average analyst estimate of 78 cents.

Total revenue fell marginally to US$9.56 billion, but brushed past analyst expectation of US$9.52 billion.

Shares of the company were up at US$48 in after-market trading.

REUTERS