Oracle's Cloud Sales Climb, but Forecast Disappoints - WSJ

Oracle’s Cloud Sales Climb, but Forecast Disappoints

Oracle Corp. ORCL -0.61% shares sank 6.5% in late trading Monday after the company disappointed Wall Street with its guidance for cloud-computing revenue in the current quarter—the third-consecutive period it has done so.

The business-software maker Monday said cloud-computing revenue would climb 19% to 23% in the fiscal fourth quarter. Analysts had expected 23% growth.

Oracle also alarmed investors with its cloud revenue for the fiscal third quarter, which rose 32% to $1.57 billion.

Those results met the muted expectations Oracle set three months ago, but investors thought the number might be even higher, given the healthy levels of tech spending rivals such as Microsoft Corp. and Salesforce.com Inc. recently said they had seen from customers.

“It’s definitely somewhat disappointing that they didn’t show upside, given the healthy spending environment,” said Brad Reback, an analyst at Stifel Nicolaus & Co.

Meanwhile, the company swung to a quarterly loss as it booked a $6.9 billion charge related to the U.S. tax overhaul.

Cloud computing is key for Oracle, which is transitioning from a leading vendor of database software companies run in their own servers to one that also sells services that customers run in data centers operated by Oracle and others.

The business-software giant Monday reported total cloud sales grew 32% in the quarter, roughly what the company said it would be three months ago.

Oracle executives remain bullish, in part because a new database product should help buttress its performance across product lines.

“The fact is that we are taking market share, and with autonomous database just beginning to show up on our pipeline, this will only strengthen our technology ecosystem growth,” Chief Executive Mark Hurd said in a conference call with analysts.

In its fiscal first and second quarters, Oracle delivered guidance for its cloud-computing business that was below what Wall Street had expected. While the stock fell each time, it recovered and managed to close at a high of $52.97 earlier this month

Shares finished Monday at $51.95. In after-hours trading, they dropped 6.5% to $48.55.

Oracle reported a net loss of $4.02 billion, or 98 cents a share. The Redwood City, Calif., company said adjusted earnings, which exclude stock-based compensation and other items, were 83 cents a share.

Revenue rose 6% to $9.77 billion, while adjusted revenue climbed 5% to $9.78 billion.

According to estimates gathered by S&P Global Market Intelligence, analysts had expected Oracle to earn 72 cents a share on an adjusted basis, on adjusted revenue of $9.78 billion.

Oracle’s software-as-a-service business, in which it sells access to web-based applications that compete against offerings from Salesforce and Workday Inc., grew 33% to $1.15 billion.

Its platform-as-a-service business—app-management and data-analytics tools—combined with infrastructure-as-a-service—computing resources and storage on demand—climbed 28% to $415 million. It competes in those markets against Amazon.com Inc. and Microsoft Corp.

While growth in Oracle’s overall cloud business has decelerated, it still grew faster than the declines in its legacy software business. The cloud business grew $377 million year-over-year while Oracle’s new software-license revenue fell $26 million.

Overall, revenue from new software licenses fell 2%, or 6% on a currency-adjusted basis, to $1.39 billion.

As important as shifting sales to the cloud is for Oracle, the roughly half of its revenue comes from software-license updates and product support. In the third quarter, that business grew 6% to $5.03 billion.

Write to Jay Greene at Jay.Greene@wsj.com

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