Oracle Confusion on Earnings

Oracle Corporation (NYSE: ORCL) is out with its highly anticipated earnings report. 24/7 Wall St. warned readers that this report could greatly impact how the market wants to treat the technology and enterprise spending sector until the middle of January. The logic was simple enough: this is the last report that matters in the sector until then and we have had no guidance from major tech and enterprise outfits in weeks.

Larry Ellison managed to beat on the bottom line with earnings from operations up 7% at $0.69 per share with revenue up 2% to $9.3 billion. The consensus estimates from Thomson Reuters were $0.67 in earnings per share and $9.19 billion in revenue. Those estimates were predicting  about 4% expected earnings growth on only 0.9% sales growth.

The margin issues and net issues need to be watched here. GAAP operating income was down 2% to $3.4 billion, and the GAAP operating margin was 37%. Non-GAAP operating income was down 1% at $4.2 billion, and the non-GAAP operating margin was 46%. That operating income level needs to be monitored, and that may be the source  of frustration.

One issue may be a drag here, but it seems as though it is in the “good enough considering Cisco report” that it may not get much mention. Oracle’s non-GAAP new software licenses and cloud software subscriptions revenues were down 1% to $2.4 billion, but software license updates and product support revenues were up 6% to $4.5 billion.

Hardware Systems revenues are meant to include hardware systems products and hardware systems support. This segment was unchanged at $1.3 billion, while hardware systems products revenues were down 3% to $714 million. The hardware business, including support, grew by about 2% on a constant currency basis in quarter driven due to double-digit revenue growth in Exadata, Exalogic and Exalytics.

No guidance was offered up, but next quarter estimates are $0.70 in earnings per share and $9.35 billion in sales. Guidance will come in the conference call.

Unless guidance is awful, this report seems much better than it could have been when you consider what peers have been reporting since late in October.

Oracle shares rose by 3.2% to $34.70 on the day, and shares are trying to figure out where to go in the after-hours session. It seems without guidance that the reaction is to wait and see.