Oracle Sales Top Analysts’ Estimates on Cloud Service Demand

Nico Grant and Olivia Carville (Bloomberg) -- Oracle Corp. topped analysts’ estimates for quarterly sales, signaling that demand for the company’s cloud services is holding up in the face of an economic slowdown caused by the coronavirus outbreak.

The company also announced a $15 billion share buyback program. Shares jumped about 4% in extended trading.

Revenue gained 1.9% to $9.8 billion in the fiscal third quarter, which ended Feb. 29, the Redwood City, California-based company said Thursday in a statement. Analysts, on average, expected $9.76 billion, according to data compiled by Bloomberg.

Chief Executive Officer Safra Catz said the effects of the spreading virus on global business added “uncertainty” to Oracle’s outlook for the current period. Sales in the three months ending in May could range from a decline of 2% to a gain of 2% from a year earlier, she said in a conference call. Analysts estimated about 2% growth to $11.3 billion.

Profit, excluding some items, will be $1.20 to $1.28 a share in the fiscal fourth quarter, she said. The midpoint is in line with analysts’ estimates.

Analysts at Jefferies LLC warned on Wednesday that enterprise software companies including Oracle could be affected by the Covid-19 pandemic that began late last year. “No one is immune,” the analysts wrote Wednesday in a note to investors.

Related:Can Oracle Catch Up in the Cloud Race?

Oracle shares closed at $39.80 in New York before the report, and have dropped 25% in the past 12 months.

In the fiscal third quarter, revenue from cloud services and license support climbed 4% to $6.93 billion. That metric includes sales from hosting customers’ data on the cloud, but a large portion is generated by maintenance fees for traditional software housed on clients’ corporate servers.

Cloud license and on-premise license sales declined 1.6% to $1.23 billion, suggesting the company is signing fewer new software deals.

While Oracle’s applications and infrastructure segments performed better in the third quarter than the previous period, “it’s highly likely we may see some slowing in the next two quarters, as enterprises delay decisions to purchase new software packages,” Anurag Rana, an analyst at Bloomberg Intelligence, said in a note after the results.

Catz has sought to boost profit by cutting expenses, including firing employees in global offices over the last few years. The world’s second-largest software maker has struggled to bring existing database customers to cloud-based offerings and better compete against big public-cloud purveyors including Amazon.com Inc.

Investors have been looking for signs that Oracle’s Autonomous Database product, which is driven by artificial intelligence, can meaningfully contribute to the company’s revenue, which has remained little changed for two years. Oracle’s cloud-based applications have been a bright spot, but so far haven’t been large enough to fuel total sales growth.

Profit, excluding some items, was 97 cents a share in the third quarter, Oracle said. Analysts estimated 96 cents.