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Oracle’s sky sales show momentum, sending shares higher

(Bloomberg) – Oracle Corp. reported results and gave a forecast that indicates that the work of moving customers to the cloud is accelerating, and the acquisition of health record provider Cerner Corp. will help accelerate the growth of the business.

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Investors reacted positively, sending shares up more than 13% in pre-market trading on Tuesday after a day in which the total market plunged and Oracle’s share reached a 16-month low.

“Link a high growth rate in our cloud infrastructure business with the newly acquired Cerner application business ̵[ads1]1; and Oracle finds itself in a position to deliver fantastic revenue growth over the next few quarters,” CEO Safra Catz said in a statement on Monday.

Cloud revenue – the highly monitored segment that Oracle has been trying to expand – rose 19% to $ 2.9 billion in the fourth quarter, the company said in Austin, Texas. Growth in the cloud had been greater than 20% since Oracle, the second largest software maker in terms of revenue, began revealing it last year.

While sales of management and financial operations applications have driven the company’s cloud efforts so far, Oracle has “experienced a significant increase in demand in our infrastructure cloud business” of 36% in the three-month period ended May 31, Catz said in the statement.

Cloud revenues will accelerate as much as 25% in the current quarter and more than 30%, in constant currency, in the fiscal year, Catz said during a conference call following the results. These revenues could increase as much as 47% in the period ending in August, including cloud sales from Cerner, she added.

Economic headwinds such as inflation and currency volatility could lead to cost cuts for companies that could contribute to cloud adoption, JPMorgan’s Mark Murphy wrote ahead of the results. The fast-growing cloud market is led by Inc., Microsoft Corp. and Alphabet Inc.’s Google.

“Customers often save money” by moving to Oracle’s cloud infrastructure, Catz said during the conversation.

Oracle hopes the $ 28.3 billion acquisition of Cerner, which was completed last week, will build interventions in healthcare, which has been relatively slow to adopt cloud technology. During the conversation, co-founder and chairman Larry Ellison said that health care “is clearly going to be our biggest business.”

The agreement will contribute to Oracle’s earnings in the financial year 2023, Catz said. With Cerner now part of Oracle’s business, revenue could increase as much as 19% in the current quarter, she said. Profit, excluding some items, will be $ 1.04 to $ 1.08 per share for the period.

In the fourth quarter of the fiscal year, sales increased by 5.5% to $ 11.8 billion, topping the average analyst estimate of $ 11.7 billion. The results marked Oracle’s eighth consecutive quarter with year-on-year revenue increases. Earnings, excluding certain items, were $ 1.54 per share, compared to an average estimate of $ 1.38 per share.

With a rising US dollar, technology companies with significant overseas exposure, including Salesforce Inc. and Microsoft Corp. seen growth eaten by currency volatility. Oracle, with nearly half of sales outside the U.S., said quarterly revenues were reduced by 5% due to currency fluctuations. On Monday, the US dollar reached its highest level since April 2020 when traders bet on an ever faster round of interest rate hikes from the Federal Reserve.

Oracle’s biggest positive surprise was licensing costs, which reflect continued investment from the company’s customers in uncertain times, said Anurag Rana, an analyst at Bloomberg Intelligence. “It is a good reflection of broad-based technology spending and bodes well for the entire sector,” he said.

Sales of cloud licenses and local licenses increased by 18% to $ 2.54 billion, beating the average estimate of $ 2.17 billion. Sales of the Fusion business management application increased 20% in the quarter, compared to 33% in the previous period. Sales of NetSuite business planning tools, aimed at small and medium-sized businesses, increased by 27%, the same as in the previous quarter.

Shares closed at $ 64.05 in New York, the lowest value since February 2021, and have fallen 27% this year due to a broad route among technology companies.

(Updated with shares.)

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