Oracle Will Report Earnings Soon. Here’s What to Expect.

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Maybe Larry Ellison’s software company can save the day.

Late Monday,

Oracle

(ticker: ORCL) will report earnings for the quarter ended in May. With tech shares mired in a deep decline, dragged down by rising inflation, soaring interest rates, recession fears, supply-chain troubles, and various other issues, the sector is in serious need of a win. A strong report from Oracle could help staunch the bleeding.

There’s reason for optimism. Oracle is in the middle of a multi-quarter push to shift more of its business to the cloud, and it is making progress. The company has been reporting mid-single-digit revenue growth for the last five quarters. In the February quarter, Oracle posted revenue of $10.5 billion, up 4% or 7% in constant currency. Total cloud-related revenue in the quarter was $2.8 billion, up 26% on a currency adjusted basis.

Oracle has projected May quarter revenue growth of between 3% and 5%, or 6% to 8% on a currency adjusted basis. The company projects profits for the quarter of $1.35 to $1.39 a share. Street consensus calls for revenue of $11.7 billion, up 4%, with profits of $1.37 a share.

For the August quarter, Street consensus calls for revenue of $10.2 billion and profits of $1.13 a share.

In a research note Friday previewing the quarter, Citi analyst Tyler Radke wrote that he is “warming up” to Oracle stock heading into the earnings report. Radke writes that discussion with resellers and channel partners finds “strong and accelerating customer demand” for the company’s core infrastructure and database products, although he sees potential headwinds from supply-chain issues, unfavorable foreign-exchange rates and the potential impact of weakening economic fundamentals. Radke keeps his Neutral rating on the stock for now, but adds that he’d consider an upgrade if the growth trend continues.

In his own earnings preview, Morgan Stanley analyst Keith Weiss likewise expressed optimism about the outlook. “With increased confidence in the underlying drivers of a modest revenue acceleration in fiscal ‘23, coupled with expectations for operating margins to sustain above prepandemic levels, we think the risk/reward at Oracle presents an interesting opportunity,” he writes. Weiss keeps his Equal Weight rating on the shares, but inched up his target price to $88 from $87.

There are other factors to watch. Oracle’s $28.3 billion acquisition of the electronic health-records company Cerner isn’t in current results, but should be in guidance from here. Given the cash required to close the deal, the Street has expected the company to slow the pace of its stock-repurchase program; Oracle bought back $600 million of stock in the February quarter. Another factor to watch: continued foreign-exchange pressures, which appear to have worsened since the company last reported earnings.

Oracle stock is down about 23% so far this year.

Write to Eric J. Savitz at [email protected]