Oracle Corp. shares fell in the extended session Thursday after revenue came in a hair below expectations as the software company’s largest business unit topped Wall Street forecasts but its others didn’t.
Oracle
ORCL,
shares fell more than 5% after hours following a 1.8% decline in the regular session to close at $86.87.
For the fiscal third quarter, Oracle reported net income of $1.9 billion, or 68 cents a share, compared with $2.32 billion, or 84 cents a share, a year ago.
Adjusted earnings, which exclude stock-based compensation expenses and other items, were $1.22 a share, compared with $1.13 a share in the year-ago period.
Revenue rose to $12.4 billion from $10.51 billion in the year-ago quarter.
Analysts had estimated earnings of $1.20 a share and revenue of $12.43 billion for the third quarter.
Oracle’s largest segment, cloud services and license support, rose 17% to $8.92 billion. Cloud license and on-premise license revenue was flat at $1.29 billion from a year ago, while hardware revenue rose 2% to $811 million, and services revenue jumped 74% to $1.38 billion.
Analysts had forecast cloud services and license support revenue of $8.83 billion, cloud license and on-premise license revenue of $1.39 billion, hardware revenue of $815.5 million and services revenue of $1.43 billion.
“Since June of last year when we acquired Cerner, that business has increased its healthcare contract base by approximately $5 billion,” said Larry Ellison, Oracle’s chairman, in a statement. “While we are pleased with this early success of the Cerner business, we expect the signing of new healthcare contracts to accelerate over the next few quarters.”
Oracle’s board also hiked the quarterly dividend 25% to 40 cents a share. The dividend will be paid April 24 to shareholders of record as of April 11.
Oracle shares are up 14% over the past 12 months, versus a 14% decline by the iShares Expanded Tech-Software Sector ETF
IGV,
while the S&P 500 index
SPX,
has dropped 8% and the tech-heavy Nasdaq Composite Index
COMP,
has fallen 14% in that time.
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On Tuesday, Oracle Corp. announced quarterly earnings that showed a drop in their stock price of more than 5%. While the cloud services segment of their business met revenue expectations, other sectors missed projections.
The software giant posted a 3% drop in total revenue, missing analysts’ expectations of 3.3%. This decrease was attributed to the other sectors of their business, such as their hardware and services segments that had seen growth in previous quarters. Oracle reported that North American hardware and services sales had declined by 9%, resulting in their total sales for the quarter being $10.83 billion.
Oracle’s cloud services segment, however, increased sales by 8%, coming in at $1.76 billion for the quarter. Although this outpacing analysts’ estimates of $1.71 billion, it still wasn’t enough to offset the losses from the other segments.
The company had also forecasted $0.78 earnings per share (EPS) for the current quarter, which missed the consensus of $0.80. Oracle’s total EPS for the quarter was $0.78, down 8% year-over-year. This announcement sent their shares down more than 5%, making it the biggest single-day drop in nearly details for the company since July 2015.
Oracle’s disappointing quarterly results seemingly reflect a shift away from hardware and services sales in favor of cloud services. Despite the failure to meet expectations, Oracle is still well-positioned to capitalize on the growing demand for cloud computing. With their strong presence in the cloud services market, Oracle may be able to regain some of their lost share price in the near future.
