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Oracle's (ORCL) Q2 Earnings Coming Up: What's in Store?

Oracle ORCL is scheduled to release second-quarter fiscal 2023 results on Dec 12 after market close.

For second-quarter fiscal 2023, Oracle anticipates total revenue growth rate, including Cerner, on a year-over-year basis, in the range of 15-17% at USD and 21-23% at cc. The Zacks Consensus Estimate for revenues is pegged at $12.04 billion, indicating a16.19% increase on a year-over-year basis.

Oracle expects non-GAAP earnings per share (“EPS”) growth rate on a year-over-year basis in the range of 1-5% at cc and in the band of $1.16-$1.20 per share due to currency headwinds. The non-GAAP EPS for the second quarter is expected to decline between 1% and 5% and be between $1.16 and $1.20 in USD.

The Zacks Consensus Estimate for earnings has remained steady at $1.17 per share in the past 30 days, suggesting a 3.3% decline from the year-ago fiscal quarter’s reported figure.

Over the trailing four quarters, Oracle’s earnings beat the Zacks Consensus Estimate on two occasions and missed the mark twice with the average surprise being 3.36%.

Oracle Corporation Price and EPS Surprise

Oracle Corporation Price and EPS Surprise
Oracle Corporation Price and EPS Surprise

Oracle Corporation price-eps-surprise | Oracle Corporation Quote

Factors to Consider

Accelerated digital transformation along with the continuation of remote work and mainstream adoption of the hybrid/flexible work model is likely to have driven demand for Oracle Cloud Infrastructure (“OCI”) services and the company’s other cloud-based applications in the to-be-reported quarter.

The acquisition of Cerner earlier in 2022 in an all-cash transaction amounting to $28.3 billion or $95 per share, the biggest ever for Oracle, is expected to bolster the company’s position in the lucrative healthcare domain.

For the fiscal second quarter of 2023, total cloud, including Cerner, is expected to grow from 46% to 50% in constant currency and from 42% to 46% in USD.

Continued momentum in back-office cloud-based Fusion Human Capital Management (“HCM”) solutions along with NetSuite Enterprise Resource Planning (“ERP”) and Fusion ERP applications is expected to have favored ORCL’s quarterly performance.

In the last reported quarter, Oracle’s Cloud services and license support revenues (73% of total revenues) in the reported quarter increased 14% year over year (up 20% at cc) to $8.41 billion. The upside was driven by continued strength in the Fusion, Autonomous Database and Oracle Cloud Infrastructure (“OCI”) services.

The migration of several large-scale SAP clients to Oracle Fusion ERP cloud and increasing deal wins in several verticals, especially banking and healthcare, might have acted as tailwinds for the company’s ERP business.

In the fiscal first quarter, management noted that revenues from Fusion ERP, Fusion HCM and NetSuite ERP were up 38%, 26% and 30%, respectively.

The robust adoption of Oracle’s next-generation autonomous database and Oracle Dedicated Region Cloud, supported by machine learning (ML) and Artificial Intelligence (AI) capabilities, might have benefited the top line. Autonomous database in Gen2 public cloud infrastructure is witnessing healthy traction.

This Zacks Rank #2 (Buy) company’s latest Multiple-VM Autonomous Database on Oracle Exadata Cloud@Customer service offering is gaining considerable traction among on-premises clients. Multiple-VM Autonomous Database enables organizations to create and run isolated, highly available Autonomous Database instances on Exadata Cloud@Customer systems that are also running non-autonomous Oracle Databases. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Oracle’s partnership with VMware VMW over Oracle Cloud VMware Solution is gaining prominence, which is expected to have aided customer growth in the to-be-reported quarter.

The Oracle VMware Solution provides a faster route to the cloud, providing predictability, security and control of on-premise VMware workloads. The solution gained popularity among leading enterprises in retail, telecommunication, finance and banking, manufacturing, government and others.

Strength in the Oracle Fusion Cloud Supply Chain & Manufacturing solution, integrated with new capabilities that help companies foster innovation and improve decision-making, is expected to contribute to the top line in the to-be-reported quarter.

Higher expenses on product development, especially increased investment in cloud platform, might have dented the fiscal fourth-quarter performance. Intense competition in the cloud computing market from the likes of Amazon Web Services, Azure platform and Google Cloud might also have limited margin expansion.

Q2 Highlights

Oracle and NVIDIA NVDA announced a multi-year partnership to help customers solve business challenges with accelerated computing and AI. The collaboration aims to bring the full NVIDIA accelerated computing stack—from GPUs to systems to software—to Oracle Cloud Infrastructure (OCI). OCI is adding tens of thousands more NVIDIA GPUs, including the A100 and upcoming H100, to its capacity.

The company renewed a strategic agreement with AT&T T that will help give new capacity and capabilities for the latter’s database and application workloads running in Oracle Cloud. The new five-year deal will build on AT&T’s use of Oracle Fusion Cloud ERP, Oracle Fusion Cloud Customer Experience (CX), OCl, and other Oracle Cloud services.


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