Oracle Sees Strong May Quarter as Contracts Boost Results
Oracle forecast optimistic results for the current quarter after beating profit expectations in its fiscal third quarter that ended in February. Cloud computing is driving what it projects as 22% to 24% gains in fourth-quarter cloud revenue, excluding its health business, as more capacity comes online.
CEO Safra Catz said it is opening and expanding existing cloud datacenters rapidly and receiving large contracts to reserve cloud infrastructure capacity. Demand for its Gen2 AI infrastructure exceeds supply. Third-quarter remaining performance obligations (indicating future work) reached $80 billion.
Oracle reported adjusted profit of $1.41 a share and revenue of $13.3 billion, up 7%. Cloud application revenue rose 14% to $3.3 billion, and cloud infrastructure revenue rose 49% to $1.8 billion. Cloud revenue, including software- and infrastructure-as-a-service, rose 25%, to $5.1 billion.
Catz said it expects the Gen2 cloud infrastructure business will remain in a “hypergrowth” phase for the foreseeable future, and expects 43% of the current $80 billion of remaining performance obligations will be recognized as revenue in the next four quarters.
Oracle also said it has now moved most of its Cerner customers to the company’s cloud infrastructure, and that the electronic health records business, acquired for $28 billion in 2022, should become a high-growth business.
What’s Next: Oracle said it has 40 contracts booked with a value of more than $1 billion each that haven’t come online yet. For the May quarter, Oracle projects revenue will rise 4% to 6%, including the Cerner business. It sees adjusted profit of $1.62 to $1.66 a share.
—Eric J. Savitz and Liz Moyer (Barron's daily email this morning).
Bullish
