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Thursday, 09/21/2023 5:09:27 PM

Thursday, September 21, 2023 5:09:27 PM

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Oracle (ORCL) reasserts $65 billion revenue forecast for 2026 despite recent setbacks
By: | September 21, 2023

Oracle Corp (NYSE:ORCL). has reaffirmed its yearly revenue projection of $65 billion by the fiscal year 2026, a forecast initially shared with investors a year ago. This reassertion comes despite recent quarterly results that left some investors disappointed. Oracle's Executive Vice President, Doug Kehring, restated these projections at the company's annual financial analysts' conference on Thursday. He expressed confidence in reaching the stated revenue goal, maintaining a 45% operating margin by fiscal 2026, and achieving an over 10% annual increase in earnings per share.

The company's strategic focus remains on expanding its cloud-computing rental business, an area where it has historically lagged behind competitors like Inc (NASDAQ:AMZN)., Microsoft Corp (NASDAQ:MSFT)., and Alphabet (NASDAQ:GOOGL) Inc.’s Google. However, investor optimism has been growing as Oracle's cloud services are believed to have the potential to grow rapidly and meet the high-demand computing needs of artificial intelligence products.

Kehring emphasized that Oracle's cloud infrastructure business, which generated $5 billion in revenue in the fiscal year ending May 2023, is targeting Google. However, this revenue represented only about 10% of Oracle's total income.

Investor enthusiasm was dampened last week when Oracle reported a 30% increase in cloud sales for the quarter, compared to a 54% surge in the previous period. This announcement led to a nearly 14% drop in Oracle's shares, marking the largest single-day decline in over two decades and pulling them down from an all-time peak.

Ahead of Thursday's event, many analysts anticipated that Oracle would maintain its outlook. To reach its target, the company needs to sustain an average annual sales growth rate of approximately 9% over the next three fiscal years.

However, given the recent slowdown in Oracle's electronic health records division Cerner (NASDAQ:CERN), which it acquired last year, and the ongoing shift to cloud services, some analysts, including Bloomberg Intelligence's Anurag Rana, believe this to be a challenging endeavor.

On Thursday, Oracle's shares fell by 2.8% to $109.65 at 3:13 p.m. in New York. Despite last week's drop, the stock had risen by 38% this year through Wednesday's close.

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