Oracle’s second quarter results (ORCL): cloud activity in the spotlight


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Oracle ORCL is expected to release its results for the second quarter of fiscal 2022 on December 9.

The company’s second quarter tax performance is expected to have benefited from the momentum of its cloud business, driven by strong adoption of Oracle Cloud Infrastructure (OCI) services and stand-alone database offerings.

The increased availability of Oracle cloud regions globally is expected to have strengthened its competitive position in the cloud computing market.

In October 2021, Oracle announced the opening of 14 new cloud regions in Europe, Middle East, Asia-Pacific and Latin America to support its cloud services platform. Oracle plans to have 44 cloud regions by the end of 2022.

In November 2021, Oracle unveiled its first cloud region in France – Oracle Cloud Marseille Region. Following this, the company unveiled Oracle Cloud Singapore Region and also launched its second cloud region in the United Arab Emirates – Cloud Abu Dhabi Region. The company currently has 34 cloud regions around the world.

Oracle Corporation revenue (quarterly)

Oracle Corporation Quarterly Revenue | Oracle Corporation Quote

Higher investments in product development, especially towards the cloud platform, are expected to have limited margin expansion. Growing competition from large and small cloud players could have played an unfavorable role.

Click here to find out what the company’s overall fiscal performance is expected to be in the second quarter.

Dynamism of cloud offers to improve performance

Oracle’s cloud solutions, including OCI services and other cloud-based applications, are seeing healthy adoption as the pursuit of remote work and hybrid work innovation.

Customer growth helps the company maintain its leadership position in the cloud space. During the quarter under review, Oracle’s OCI services were operated by SoundHoud as the company accelerates its global expansion efforts. The OCI platform was also leveraged by Samsung Securities to migrate Derivative Analytics Business to the cloud environment.

Oracle has partnered with India-based Bharti Airtel to expand its cloud-native offerings to more than one million enterprise customers, which include large enterprises, start-ups, governments, and small and medium-sized enterprises across the world. country. Oracle has also deployed OCI AI services, designed to help developers easily implement AI services in applications.

Zacks’ consensus estimate for cloud services and license support revenue is set at $ 7.525 billion, which indicates a 5.8% year-over-year improvement.

The momentum of the cloud-based Fusion Human Capital Management (“HCM”) back-office solutions as well as the NetSuite Enterprise Resource Planning (“ERP”) and Fusion ERP applications should have contributed to the company’s quarterly performance.

The migration of several large-scale SAP customers to the Oracle Fusion ERP cloud and the increase in contracts concluded in several verticals, particularly banking and healthcare, may have been a driving force in the company’s ERP business. .

Cloud revenue of NetSuite ERP and Fusion ERP increased 28% and 32%, respectively, in the first quarter of fiscal 2022.

Among the contracts won in the Fusion Cloud space, Netherlands-based telecommunications service provider KPN leveraged Oracle Fusion Cloud Applications to reorganize the company’s operations. Honda Motor implemented the Oracle Fusion Cloud ERP solution to streamline indirect purchasing activities and reduce procurement costs for indirect materials.

Oracle’s latest Exadata Cloud @ Customer service offering is gaining traction among on-premises customers. In addition, the stand-alone database in the Gen2 public cloud infrastructure is seeing high adoption.

The consensus estimate for both cloud licensing and on-premises licensing is set at $ 1.1 billion, indicating a 0.7% year-over-year improvement.

Growing influence of the Oracle Fusion Cloud Supply Chain & Manufacturing (SCM) solution, embedded with new capabilities that help businesses drive innovation and improve decision making, is expected to have contributed to quarterly revenue about to be published.

Visibility of IT spend is a concern

The coronavirus situation remains very fluid. This uncertainty has probably kept IT spending in small and medium-sized businesses under control. This could have negatively impacted Oracle revenue in the second quarter.

Zacks’ consensus estimate for fiscal second quarter hardware revenue is set at $ 814 million, which suggests a 3.6% year-over-year decline. The consensus mark for service revenue is $ 787 million, indicating a 4.7% year-over-year increase.

Currently, Oracle carries a Zacks Rank # 3 (Hold). You can see The full list of Zacks # 1 Rank (Strong Buy) stocks today here.

Strong cloud revenues for key players

Strong demand for cloud solutions in the context of ongoing work and home learning and accelerated digitization trends has led to a strong earnings season for cloud businesses. Let’s take a look at the latest quarterly performance of the major cloud players – Amazon AMZN, Microsoft MSFT and Alphabet GOOGL.

Amazon reported net sales of $ 110.81 billion in the third quarter of 2021, up 15% year-over-year thanks to the momentum of Amazon Web Services (“AWS”). AWS revenue (15% of sales) grew 39% year-over-year to $ 16.1 billion in the most recently published quarter.

Microsoft’s first quarter FY2022 revenue of $ 45.3 billion increased 22% from last year’s quarter levels (up 20% at constant exchange rate or cc), thanks to Azure cloud offerings. The top line broke Zacks’ consensus estimate by 3.3%.

In the last published quarter, revenues from Azure and other cloud services jumped 50% year-on-year (up 48% at cc). The rise was driven by robust growth in consumer-oriented businesses.

Alphabet’s third quarter 2021 revenue of $ 65.1 billion increased 41% year-on-year (39% cc). The figure increased 5.2% from levels in the previous quarter.

Revenue performance was driven by continued momentum in the Company’s search, advertising and cloud businesses. Google Cloud revenue grew 44.9% year-over-year to $ 4.9 billion, contributing 7.7% to quarterly revenue.

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