Oracle (ORCL) will report fiscal fourth quarter earnings results after the closing bell Wednesday. With the shares trading at near all-time highs, the database giant must give investors something to celebrate.
Aside from the top- and bottom-line results, the major topic will be the progress of the company’s cloud-based platform. The company is in the third year of a multi-year transition towards a cloud subscription-based model, while moving away from its legacy database business. The cloud market continues to accelerate as evidenced by the strong earnings beats from the likes of Salesforce (CRM). Analysts will look for clues that suggests Oracle can finally stake a legitimate claim to the that market.
Oracle shares have rallied nearly 20% this year to just a couple of points below all-time highs. For the shares to maintain their upward trajectory, Wall Street will want to see further evidence that Oracle is finally moving from merely “adapting” to the emerging cloud market to become a legitimate competitor to, say, Microsoft (MSFT) and Amazon (AMZN). With consensus estimates calling for a 1.4% decline in revenue for fiscal 2019 and a 2.3% growth in fiscal 2020, there will be major emphasis placed on what the company says about its outlook for fiscal 2020.
In the three months that ended May, Wall Street expects Oracle to earn $1.07 per share on revenue of $10.95 billion. This compares to the year-ago quarter when earnings came to 99 cents per share on revenue of $11.26 billion. For the full year, earnings are projected to rise 9.5% year over year to $3.44 per share, up from $3.12 a year ago, while revenue of $39.32 billion would decline 1.4% year over year.
The company’s quarterly profits have topped consensus estimates for eight straight quarters. It’s the revenue category where investors are, understandably, worried. Last week KeyBanc analyst Brent Bracelin, who has a Sector Weight rating on the stock, lowered his outlook for fiscal 2020 by a penny to $3.78, writing Oracle’s could suffer as large companies shift their investments away from on-premises computing toward software cloud where Oracle has struggled to compete.
Following the release of Q3 results Oracle stock fell as much as 4% even though the company beat on both the top and bottom lines. Adjusted EPS of 87 cents beat consensus of 84 cents per share, while revenue of $9.61 billion, though falling 1% year over year, topped forecast of $9.59 billion. Cloud revenue rose impressively to $6.66 billion, while hardware revenue and service revenue came in respectively at $915 million and $786 million.
The company’s revenue forecast, which called for flat growth to down 2% spooked investors and prompted analyst downgrades. On Wednesday Wall Street will want to see not only that these metrics improve, but the company can offer an outlook that projects strength in its growth initiatives. And to the extent Oracle can continue growing its market share, the stock, which pays a decent 1.6% dividend yield, is poised to keep climbing.