Oracle is increasing its stock-repurchase program by $20 billion.
Justin Sullivan/Getty ImagesOracle stock is falling even though the enterprise-software company reported better-than-expected financial results, while also announcing an expanded stock repurchase program and a 33% dividend increase.
Revenue for the fiscal third quarter, ended Feb. 28, was $10.09 billion, up 3% from a year earlier, in line with the company’s forecast of 2% to 4% growth, and slightly ahead of the Street consensus at $10.07 billion. Adjusted profits were $1.16 a share, up 20%, and ahead of the company’s forecast for profits of $1.09 to $1.13 a share.
Under generally accepted accounting principles, operating income was $3.9 billion, up 10%. Non-GAAP, or adjusted, operating income was $4.8 billion, also up 10%. GAAP net income was $5 billion, or $1.68 a share, including a $2.3 billion tax benefit from the transfer of certain assets between subsidiaries.
Oracle also announced a $20 billion expansion of its stock repurchase program and lifted its quarterly dividend rate to 32 cents, from 24 cents. The move gives the stock a yield of about 1.8%.
Oracle said it continues to see strong sales growth in cloud-based applications, with Fusion ERP (financial software for large companies) up 30% and NetSuite ERP (for smaller companies) up 24%. Subscription revenue overall was up 5%. Oracle’s sale subscription revenue now accounts for 72% of overall revenue.
The company also said that it again saw more than 100% growth in its Oracle Cloud Infrastructure business, which competes with public cloud leaders Amazon.com (AMZN), Microsoft (MSFT), and Alphabet (GOOG).
“We are opening new regions as fast as we can to support our rapidly growing multi-billion dollar infrastructure business,” Oracle Chairman and founder Larry Ellison said in a statement. “On the applications front, analysts continue to rank Oracle the clear number one in cloud ERP.” He said Oracle signed contracts totaling hundreds of millions of dollars to move several more large companies from SAP ERP to Oracle Fusion.
The company said that “cloud service and license support” revenue rose 5% in the quarter to $7.25 billion, while “cloud license and on-premise license” revenue, the company’s traditional business, was $1.28 billion, up 4%. Revenue in the hardware business was $820 million, down 4%, while services came in at $737 million, down 5%.
On a call with investors Wednesday afternoon, CEO Safra Catz said the company expects May quarter revenues to be up by between 5% and 7%, or between 1% and 3% in constant currency.
She said Oracle expects non-GAAP profits for the quarter of $1.28 to $1.32 a share, or between $1.20 and $1.24 a share in constant currency. The Wall Street consensus had been for $1.20 a share. Catz said that the company expects to spend aggressively in the quarter to expand its Oracle Cloud capacity in preparation for expected strong demand in fiscal 2022.
In a remarkable moment, Ellison on the call read a list of more than 100 companies he says have shifted some or all of their financial application business from SAP’s ERP software to Oracle’s Fusion ERP, including First Solar, Cemex, Western Digital, and many others.
In late trading, Oracle shares were down 6%, to $67.80. The stock has been sharply outperforming the market in recent weeks. Even with Wednesday afternoon’s weakness, the stock is up about 10% since a recent Barron’s cover story about the company.
Write to Eric J. Savitz at eric.savitz@barrons.com
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Oracle Expands Buyback Plan, Lifts Dividend 33% as Earnings Come in Strong - Barron's
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