Oracle jumps after revenue tops estimates on strong cloud effort

Oracle reported better-than-expected quarterly revenue and profit in a sign that demand for information technology hasn’t been slowed by inflation and economic uncertainty. Shares jumped about 9 per cent in extended trading.

Sales increased 5.5 per cent to $11.8bn in the fiscal fourth quarter, topping the average analyst estimate of $11.7bn. Profit, excluding some items, was $1.54 a share, compared with the average estimate of $1.38 a share.

Cloud revenue – the highly watched segment that Oracle has been trying to expand – rose 19 per cent to $2.9bn in the three months ended May 31, the Austin, Texas-based company said Monday in a statement. Cloud growth had been greater than 20 per cent since Oracle began disclosing it last year.

“These consistent increases in our quarterly revenue growth rate typically have been driven by our market leading Fusion and NetSuite cloud applications,” chief executive officer Safra Catz said in the statement. “But this Q4, we also experienced a major increase in demand in our infrastructure cloud business – which grew 39 per cent in constant currency.”

Economic headwinds like inflation and currency volatility could lead to corporate cost-cutting that may help drive cloud adoption, wrote JPMorgan’s Mark Murphy ahead of the results. The fast-growing cloud market is led by Amazon.com, Microsoft and Alphabet’s Google.

Oracle is hoping its $28.3bn acquisition of digital medical records provider Cerner Corp., completed last week, will build inroads in the health care industry, which has been comparatively slow to adopt cloud technology. Catz has said the deal should be “substantially accretive” to Oracle’s earnings in fiscal year 2023. Co-founder and chairman Larry Ellison said last week that the deal will help Oracle create a US health records database.

With a surging US dollar, tech peers with significant overseas exposure including Salesforce and Microsoft Corp. have seen growth eaten by currency volatility. Oracle, with nearly half of its sales outside the Americas, said it suffered a 5 per cent hit to its quarterly revenue from currency fluctuations. On Monday, the US dollar hit its highest level since April 2020 as traders bet on an increasingly-rapid round of interest rate hikes from the Federal Reserve.

Sales of the Fusion application for managing corporate finances rose 20 per cent in the period, compared with 33 per cent last quarter. Revenue from NetSuite’s enterprise planning tools, targeted to small- and mid-sized businesses, increased 27 per cent, the same as in the previous period.

The shares closed at $64.05 in New York, the lowest value in 16 months, and have slipped 27 per cent this year amid a broad rout among technology companies.