Oracle stock rises as earnings and revenue beat, but profit forecast comes in slightly short

For the fiscal third quarter, Chief Executive Safra Catz in a conference call later Monday said revenue should increase 17% to 19% from last year, suggesting a quarterly total of roughly $12.3 billion to $12.5 billion, and guided for adjusted earnings of $1.17 a share to $1.21 a share. Analysts on average were expecting adjusted earnings of $1.23 a share on sales of $12.21 billion for the fiscal third quarter, according to FactSet. 

Oracle shares gained nearly 3% in after-hours trading after the results were announced, following a 1.8% increase to $81.29 in regular trading. The forecast was more likely to affect the stock than the results, as concerns about an increasing slowdown in business spending have rocked a swath of software companies in recent weeks.

“We believe the darkest days of this downturn are ahead of us,” Monness Crespi Hardt analyst Brian J. White wrote in a preview of Oracle results, later adding that “results across Big Tech, the leading public clouds, and the enterprise software complex paint an increasingly concerning picture for the software world heading into 2023.”

Oracle stock has outperformed the S&P 500 index
SPX,
+1.43%
since executives hosted an event for financial analysts and investors in October, with shares gaining 4.8% in the past three months while the larger index fell 3.9%. Oracle executives promised to grow adjusted earnings by more than 10% every year as revenue growth accelerates, after years of stagnant sales growth led to large share repurchases and constant cuts to improve the software company’s bottom line.

Oracle is experiencing strong revenue growth thanks to the acquisition of healthcare-focused company Cerner, a $28 billion deal that closed in June. There are hopes for organic growth as well, though, as Oracle’s cloud-computing effort starts to show fruit, including winning part of a recent Defense Department contract after suing to halt an earlier version of that award.