Oracle jumps after Q3 results exceed expectations, boost to sales guidance
Oracle had gained nearly 12% in early trading on Wednesday after the company's quarterly results and outlook gave investors reason to cheer.
The hyperscaler reported:
Sales of $17.2 billion (estimate: $16.9 billion).
Adjusted earnings per share of $1.79 (estimate: $1.70).
RPO (remaining performance obligations, or backlog) of $553 billion (estimate: $537.8 billion).
Oracle’s closely watched capex for the quarter was $18.64 billion, above analyst estimates of $14 billion.
Management also raised its sales outlook for the next fiscal year to $90 billion; analysts had expected $86.7 billion.
One year ago, management suggested that its fiscal 2027 top-line growth rate would be around 20%. And last quarter, the company said that 2027 sales would be $4 billion higher than previously expected. Putting this all together, this means Oracle’s previous 2027 sales guidance was in the neighborhood of $84.4 billion ahead of this report.
Breaking down Oracle’s cloud business:
Cloud revenue was $8.9 billion, up 44% year on year.
Cloud infrastructure revenue was $4.9 billion, up 84% year on year.
Cloud application revenue was $4 billion, up 13% year on year.
All of those figures were marginally ahead of estimates.
The cloud company’s elevated indebtedness and expected cash burn compare unfavorably to other hyperscalers, which caused markets to treat its aggressive capex plans as more risky than those of its peers. That’s been exacerbated by OpenAI, itself a cash incinerator, being the source of much of Oracle’s pipeline of future business.
Oracle’s five-year credit default swap spreads widened significantly from mid-September through late January due to this counterparty and credit risk. The company’s perceived creditworthiness recovered after announcing plans to raise money through equity, not just debt, to find its expansion plans, before CDS spreads once again blew out to their widest level since 2009.
“Oracle has been stained by the negative sentiment around OpenAI and is generally viewed as a poster child for AI Capex excess / madness and so a super squeezy rally in the stock could tell us AI Capex fears have peaked for now,” Brent Donnelly, president of Spectra Markets, wrote ahead of this release.
Oracle shares took a beating recently, as a number of analysts have lowered their price targets for the stock, which is down about 56% from its 52-week high of $345.72.
