Weaker than anticipated third quarter earnings and revenue sent shares of Oracle down around 5% to below $36 in after hours trading.
Tuesday Oracle reported $9.3 billion in third quarter revenue, up 4% from the same period last year but slightly short of Wall Street analysts’ $9.4 billion consensus estimate. Net income came in at $2.6 billion, meaning earnings per share were 56 cents in line with Street expectations. Shares dropped more than 5% to around $36.83 in after-hours trading following the report. Excluding one time items net income was flat at $3.1 billion, or 68 cents per share, 2 cents short of consensus.
In a note on the results Citi Analyst Walter Pritchard noted that the revenue miss was offset by an improved operating margin thanks to cost control.
Software revenue, up 5% to $7 billion, brought in the bulk of the company’s sales with new licenses and subscriptions making up about 35% of sector sales. “Sales of Oracle’s Cloud Applications accelerated sharply in the quarter with bookings growth of over 60%,” said President Mark Hurd in a statement. Hurd also pointed out that revenue from cloud applications was near $300 million and that all cloud suited showed triple-digit growth.
Billionaire CEO Larry Ellison noted that sales of Oracle’s server offerings are growing, while throughout the industry traditional high-end server product lines are in steep decline.”
Ellison added, “Our Engineered Systems business is growing rapidly for the same fundamental reason that our Cloud Applications business is growing rapidly. In both cases, customers want us to integrate the hardware and software and make it work together, so they don’t have to.”
Looking ahead, Oracle expects both subscription and hardware revenue to increase 0% to 10% and total revenue growth between 3% and 7%. The company expects fourth quarter earnings per share to fall between 79 cents and 86 cents. On a non-GAAP basis Oracle forecasts 92 cents to 99 cents in earnings per share.