Oracle Stock Jumps on Q4 Earnings Beat, Upbeat Cloud Forecast

Globe and Mail

a day ago

Oracle ORCL stock rose more than 7% in extended-hours trading after the company reported its fourth-quarter fiscal 2025 earnings, wherein both top and bottom lines beat the Zacks Consensus Estimate. Oracle also raised its annual revenue growth forecast, betting on robust demand for its cloud offerings from companies deploying artificial intelligence.
The company reported fourth-quarter fiscal 2025 non-GAAP earnings of $1.70 per share, which beat the Zacks Consensus Estimate by 3.66% and increased 5% year over year in USD and 3% in constant currency (cc).
Revenues rose 11% in USD and cc year over year to $15.9 billion, driven by continued momentum from its Oracle Cloud Infrastructure ('OCI') business, including winning cloud-computing contracts from AI-focused startups. The figure beat the Zacks Consensus Estimate by 2.31%, encouraging investors' enthusiasm for the company's ascendant cloud business.
Revenues from the Americas increased 12.2% year over year to $10.03 billion and accounted for 63.1% of total revenues. Europe/Middle East/Africa climbed 12.9% year over year to $3.99 billion and contributed 25.1% of total revenues. The remaining revenues came from Asia Pacific, which increased 3.9% year over year to $1.87 billion.
ORCL's cloud infrastructure business is racing to build out computing capacity for AI startups and other users of the cloud. The company has long tried to find its footing in the lucrative industry of renting computing power and storage, which is dominated by much larger rivals led by Amazon.com AMZN -owned Amazon Web Services, Alphabet GOOGL -owned Google and Microsoft MSFT.
Shares of Oracle have gained 5.8% so far this year, outperforming the Zacks Computer and Technology sector's growth of 2.4%. Shares of Microsoft have returned 12.1% year to date, while Amazon and Google have declined 2.8% and 6.3%, respectively.
ORCL's Q4 Top-Line Details
Cloud services and license support revenues increased 14% year over year and in cc to $11.7 billion, driven by OCI, strategic cloud applications and cloud database services. Cloud license and on-premise license revenues increased 9% year over year (up 8% at cc) to $2 billion.
The company's strategic SaaS products are seeing strong bookings and higher renewal rates, contributing to accelerated growth.
Total cloud revenues (SaaS plus IaaS) were up 27% year over year at $6.7 billion. Cloud Infrastructure (IaaS) revenues came in at $3 billion, up 52% year over year. Cloud Application (SaaS) revenues of $3.7 billion increased 12% year over year.
Fusion Cloud ERP (SaaS) revenues came in at $1 billion, up 22% year over year. NetSuite Cloud ERP (SaaS) revenues of $1 billion increased 18% year over year.
Hardware revenues were $850 million, up 1% year over year (flat in cc). Services revenues decreased 2% year over year and in cc to $1.34 billion.
Oracle is currently live in 23 cloud regions with its database in cloud services and has another 47 planned. Database subscription revenues, which include database license support, were up 7%.
Infrastructure subscription revenues in the quarter, which include license support, were $6.7 billion, up 19%. Application subscription revenues, which include product support, were $5 billion, up 8% year over year.
The company's strategic back-office SaaS applications now have annualized revenues of $9.3 billion and were up 20%. Software license revenues were up 8% to $2 billion.
Oracle Cloud Infrastructure consumption revenues were up 62% and demand continues to dramatically outstrip supply. Infrastructure cloud services now have an annualized revenues of nearly $12 billion. Cloud database services, which were up 31%, now have annualized revenues of $2.6 billion. Autonomous Database consumption revenue was up 47% on top of the 27% growth reported last year.
As on-premise databases migrate to the cloud, either on OCI directly or through the company's database at cloud services with Azure, Google or AWS, Oracle now expects that cloud database revenues collectively will be the third driver of revenue growth alongside OCI and strategic SaaS.
Operating Details of Oracle
The non-GAAP total operating expenses increased 16% year over year and in cc to $8.86 billion.
The non-GAAP operating income was $7.03 billion, up 5% year over year and 4% at cc. The non-GAAP operating margin was 44%, which contracted 244 basis points (bps) on a year-over-year basis and 266 bps in cc.
ORCL's Q4 Balance Sheet & Cash Flow
As of May 31, 2025, Oracle had cash & cash equivalents and marketable securities of $11.2 billion compared with $17.8 billion as of Feb. 28, 2025.
Operating cash flow came in at $20.8 billion while this Zacks Rank #4 (Sell) company reported a negative free cash flow of $394 million, respectively.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
ORCL's remaining performance obligations now stand at $138 billion, up $8 billion sequentially and 41% from last year.
Cloud RPO grew 56% on top of the 80% growth last year and now represents nearly 80% of total RPO. Approximately 33% of the total RPO is expected to be recognized as revenues over the next 12 months.
The company purchased more than 1 million shares for a total of $150 million. Oracle also announced that its board of directors declared a quarterly cash dividend of 50 cents per share of outstanding common stock. This increased dividend will be paid to stockholders of record as of the close of business on July 10, 2025, with a payment date of July 24, 2025.
Guidance
For the first quarter of fiscal 2026, Oracle provided specific financial targets assuming current currency exchange rates. Total revenues are expected to grow 11-13% in cc and 12-14% in USD. Total cloud revenues are projected to grow 26-30% in both cc and USD. Non-GAAP earnings per share are expected to be in the range of $1.44-$1.48 in cc (representing 4-6% growth) and between $1.46 and $1.50 in USD (representing 5-7% growth). The guidance assumes a base tax rate of 19%, though management noted that one-time tax events could cause actual rates to vary. Currency is expected to have a modest 2 cents positive effect on EPS and a flat to 1% positive effect on revenues, depending on rounding.
Oracle provided robust guidance for fiscal 2026, expressing strong confidence in accelerating growth rates. The company expects total cloud revenues (applications plus infrastructure) to grow more than 40% in cc, representing a significant acceleration from the 24% growth achieved in fiscal 2025. Cloud infrastructure revenues are projected to grow even more dramatically at over 70%, up from 51% in the prior year. Total company revenues are expected to reach at least $67 billion, representing 16% growth in cc and exceeding their previous guidance by more than $1 billion. RPO is anticipated to grow more than 100% in fiscal 2026, reflecting strong contracted future business.
Oracle also indicated that capital expenditures will increase substantially to more than $25 billion in fiscal 2026, up from $21.2 billion in fiscal 2025, as they work to meet overwhelming demand from their backlog and bring more capacity online. Management expressed confidence that this increased investment will drive further revenues and profit growth acceleration.
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