Oracle sinks after posting disappointing sales growth and guidance

Larry ellison oracle

Shares of Oracle sank on Thursday after the company posted disappointing sales growth and revenue guidance in its third-quarter fiscal year 2021 earnings report.

Oracle did manage to narrowly beat analysts’ earnings forecasts for the quarter, posting earnings per share of $US1.16 ($1).

However, revenue increased just 3% to hit $US10.09 ($13) billion, and guidance revealed Oracle expects only 1%-3% sales growth in constant currency next quarter.

The Redwood Shores, California-based company has been attempting to slow revenue losses with a move into cloud applications, especially those for managing corporate finance.

Cloud services and license support revenue was up 5% year-over-year in the third quarter but fell short of estimates at $US7.25 ($9) billion vs. $US7.28 ($9) billion. Cloud license and on-premise license services managed a small beat, hitting $US1.28 ($2) billion in revenue compared to analyst expectations for $US1.21 ($2) billion.

The company’s Fusion ERP application for managing corporate finance saw its revenue jump 30% in the third quarter, but the growth rate fell from the 33% reported in the fiscal second quarter.

Netsuite’s ERP software, which is targeted at small and mid-sized businesses, rose 24% in the third quarter as well.

Oracle CEO, Safra Catz said the company “continued to extend our huge lead in the cloud ERP market” after the performance.

Executive Chairman Larry Ellison spent much of the quarterly conference call discussing his company’s recent gains in the cloud sector as well. The Chairman said more than 100 customers have made the switch to Oracle’s services from rival SAP SE.

“Once again in Q3, Oracle’s Gen2 Cloud Infrastructure business added customers, and grew revenue at a rate in excess of 100%,” said Larry Ellison, Oracle Chairman and CTO. “Oracle signed contracts totaling hundreds of millions of dollars to migrate several more large companies from SAP ERP to Oracle Fusion ERP.”

Analyst Dan Ives at Wedbush told Insider via email that he believes Oracle is “late to the game on cloud” and says that “it’s been a headwind to growth.”

Ives said despite recent cloud wins, Oracle is still “trailing Amazon and Microsoft in the cloud arms race.”

Oracle also declared a quarterly dividend of $US0.32 ($0) per share on March 10, marking a 33.3% increase from the prior dividend of $US0.24 ($0) per share.

And the board of Directors increased the authorization for share repurchases by $US20B.

Shares of Oracle traded down 7.04% as of 1:16 p.m ET on Thursday.

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