Oracle’s Cloud Sales Show Momentum, Sending Higher Stocks

(Bloomberg) — Oracle Corp. released results and made predictions suggesting efforts to move its customers to the cloud are gaining momentum, and the acquisition of health records provider Cerner Corp. will help accelerate the company’s growth.

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Investors reacted positively, sending shares up more than 13% in premarket trading on Tuesday after a day in which the overall market plunged and Oracle’s stock hit a 16-month low.

“Add a high rate of growth in our cloud infrastructure business to the newly acquired Cerner applications business – and Oracle is in a position to deliver meteoric revenue growth in the coming quarters,” the director said Monday. General Safra Catz in a press release.

Cloud revenue — the much-watched segment Oracle has been trying to expand — rose 19% to $2.9 billion in the fiscal fourth quarter, the Austin, Texas-based company said. Cloud sales growth has been over 20% since Oracle, the second-largest software maker by revenue, began disclosing it last year.

While sales of applications for management and financial operations have fueled the company’s cloud effort so far, Oracle “has seen a significant increase in demand in our infrastructure cloud business” from 36% in the three months ended May 31, Catz said in the statement. .

Cloud revenue will accelerate by up to 25% in the current quarter and more than 30%, in constant currency, in the fiscal year, Catz said on a post-earnings conference call. Those revenues could increase by up to 47% in the period ending August, including Cerner’s cloud sales, she added.

Economic headwinds such as inflation and currency volatility could lead to lower business costs that could drive cloud adoption, JPMorgan’s Mark Murphy wrote ahead of the results. The growing cloud market is led by Amazon.com Inc., Microsoft Corp. and Google from Alphabet Inc.

“Often customers save money” by switching to Oracle’s cloud infrastructure, Catz said on the call.

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

The deal will be accretive to Oracle’s earnings in fiscal 2023, Catz said. With Cerner now part of Oracle’s business, revenue could grow as much as 19% in the current quarter, she said. Earnings, excluding certain items, will be $1.04 to $1.08 per share during the period.

In the fiscal fourth quarter, sales rose 5.5% to $11.8 billion, beating analysts’ average estimate of $11.7 billion. The results marked Oracle’s eighth straight quarter of year-over-year revenue increases. Earnings, excluding certain items, were $1.54 per share, versus an average estimate of $1.38 per share.

With a surging U.S. dollar, tech peers with significant overseas exposure, including Salesforce Inc. and Microsoft Corp., have seen their growth eaten away by currency volatility. Oracle, with nearly half of its sales outside the Americas, said quarterly revenue was reduced 5% by currency fluctuations. On Monday, the US dollar hit its highest level since April 2020 as traders bet on a series of faster and faster interest rate hikes from the Federal Reserve.

Oracle’s biggest positive surprise has been licensing spending, which reflects continued investment by the company’s customers during these uncertain times, said Bloomberg Intelligence analyst Anurag Rana. “It’s a good reflection of large-scale technology spending and bodes well for the industry as a whole,” he said.

Sales of cloud licenses and on-premises licenses increased 18% to $2.54 billion, beating the average estimate of $2.17 billion. Sales of the Fusion enterprise finance application grew 20% in the quarter, compared to 33% in the prior period. Sales of NetSuite business planning tools for small and medium-sized businesses increased 27% from the previous quarter.

Shares closed at $64.05 in New York, the lowest value since February 2021, and have fallen 27% this year amid a broad rout among tech companies.

(Updated with shares.)

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