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Momentum in Cloud Business to Aid Oracle's (ORCL) Q1 Earnings

Oracle's (ORCL) fiscal first-quarter performance is likely to benefit from strength in cloud-based and autonomous database offerings.

This story originally appeared on Zacks

Oracle ORCL is slated to report first-quarter fiscal 2022 results on Sep 13.

The company’s fiscal first-quarter performance is anticipated to have benefited from strength in its cloud business driven by the strong uptake of Oracle Cloud Infrastructure (OCI) services and Autonomous Database offerings.

Increased availability of Oracle cloud regions globally is expected to have strengthened its competitive position in the cloud computing market against the likes of Amazon’s AMZN Amazon Web Services, Microsoft's MSFT Azure and Alphabet's GOOGL Google Cloud. The company currently has 30 cloud regions in the world.

Higher investments in product development, especially toward cloud platform, is likely to have limited margin expansion. Increasing competition from the likes of both big and small players in the cloud domain might have acted as a headwind.

Click here to know what the company’s overall fiscal first-quarter performance is expected to be.

- Zacks

Oracle Corporation Revenue (Quarterly)


Oracle Corporation Revenue (Quarterly)

Oracle Corporation revenue-quarterly | Oracle Corporation Quote


Strength in Cloud Business Bodes Well

The Zacks Consensus Estimate for Cloud services and license support revenues is pegged at $7.396 billion, indicating an improvement of 6.5% on a year-over-year basis.

Oracle’s cloud solutions including OCI services as well as other cloud-based applications are witnessing healthy adoption amid continuation of remote work and online learning set up. The mainstream adoption of hybrid/flexible work model is likely to have acted as a tailwind.

Growing clientele is helping the company to maintain its leading position in the cloud domain. In the quarter under review, Oracle’s OCI services were leveraged by Medallia to run its Medallia Experience Cloud Software as a Service (SaaS) platform. Telenor implemented cloud-based Oracle Communications Billing and Revenue Management solution to support 5G services as well as offer smooth charging and billing interactions for subscribers. The company inked a multi-year partnership to help Deutsche Bank ramp up its digital transformation efforts.

Increasing clout of Oracle Fusion Cloud Supply Chain & Manufacturing (SCM) solution, integrated with new capabilities that help companies foster innovation and improve decision making, is expected to have contributed to the top line in the about-to-be-reported quarter.

In August 2021, Oracle rolled out Oracle Fusion Cloud Procurement product suite designed to help a business enterprise to handle its “source-to-settle cycle”. The solution also helps enterprises to lower risk and costs as well as streamline supplier management and contracting processes.

Solid traction in cloud-based Fusion Human Capital Management (“HCM”), NetSuite Enterprise Resource Planning (“ERP”) and Fusion ERP applications is expected to have continued in the fiscal first quarter, driven by coronavirus-induced demand for cloud-based applications.

In the fourth quarter of fiscal 2021, Fusion HCM, NetSuite ERP and Fusion ERP businesses were up 30%, 22% and 42%, respectively.

In the quarter under review, Oracle introduced the Oracle Dynamic Skills solution that will enable businesses to gain a thorough understanding of their employees’ skill sets as well as help staff to upskill. Oracle Dynamic Skills, which leverages Artificial Intelligence, is a part of Oracle’s broader Fusion Cloud HCM solution. The company also disclosed that it will be adding in-built payroll support for India to its Oracle Fusion Cloud Payroll platform.

Among deal wins in the HCM and ERP space, the University of Pittsburgh deployed Oracle Fusion Cloud HCM solutions to upgrade its HR operations. University of California Merced implemented Oracle Fusion Cloud ERP and Oracle Fusion Cloud Enterprise Performance Management to bolster operational efficiency and generate actionable insights.

Oracle’s latest Exadata Cloud@Customer service offering is gaining traction among on-premises customers. Also, autonomous database in Gen2 public cloud infrastructure is witnessing solid uptake.

The consensus estimate for Cloud license and on-premise license is pegged at $869 million, indicating a decline of 1.9% on a year-over-year basis.

IT Spend Visibility is a Concern

The coronavirus situation is deteriorating with the emergence of a more contagious Delta variant strain. Several parts of the world including some regions in the United States are witnessing Delta variant outbreaks. This is likely to have affected IT spending across small- and medium-sized businesses. This might have had a negative impact on Oracle’s fiscal first-quarter top line.

The Zacks Consensus Estimate for fiscal first-quarter Hardware revenues is pegged at $780 million, suggesting a drop of 4.2% on a year-over-year basis. The consensus mark for Services revenues is at $747 million, indicating a rise of 3.8% on a year-over-year basis.

At present, Oracle carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

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