Markets
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Jon Keegan & Luke Kawa

Oracle jumps after Q3 results exceed expectations, boost to sales guidance

Oracle is up 5% in postmarket trading after its 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.

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Boeing faces Q1 delivery slowdown after discovering 737 Max wiring issues

Boeing shares dropped on Tuesday following the company’s announcement that it will delay some 737 Max deliveries this month after discovering scratches on wiring within the planes.

According to the plane maker, fixing the issues could take a matter of days for each plane. This could impact March and Q1 delivery figures, but Boeing doesn’t expect yearly totals to be affected.

Boeing is still producing an average of 42 737 Max planes per month, The Seattle Times reported. The FAA raised Boeing’s 737 production cap late last year.

Boeing delivered 51 commercial planes in February, its highest total for the month since 2018. The figure far exceeded the 35 deliveries for Airbus, the company’s European rival.

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Boeing delivered 51 commercial planes in February, its highest total for the month since 2018. The figure far exceeded the 35 deliveries for Airbus, the company’s European rival.

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Deutsche Bank upgrades software stocks, sees no evidence of negative impacts from AI on sales this year

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Hims continues to rise on analyst upgrades following its Novo Nordisk partnership

Shares of telehealth company Hims & Hers climbed Tuesday as analysts upgraded the stock following the Monday announcement of its landmark deal with Wegovy maker Novo Nordisk.

Shares were recently up 12%.

Citi upgraded Hims to “neutral/high risk” from “sell/high risk” in a Monday afternoon note, writing that the deal “significantly de-risks Hims.” Citi analyst Daniel Grosslight wrote:

“Valuation remains tricky for Hims as much hinges on (1) how much compounded GLP-1 revenue/adj. EBITDA remains post-partnership and (2) how much of the hole HIMS can fill with its branded offering.”

Hims also received an upgrade to “neutral” from “underperform” from Bank of America:

“By partnering with Novo Nordisk and transitioning patients to Novo’s branded product, Hims is likely to experience some attrition, but is also likely to gain new members that are looking for a branded drug.”

The deal will see Novo’s Wegovy offered on Hims in its injection and pill forms later this month, priced at the level Novo charges for self-pay. Hims will also offer Ozempic to treat diabetes. Hims won’t advertise compounded GLP-1s, according to Novo Nordisk. A previous deal between the companies last year fell apart in 55 days after Novo accused Hims of “illegal mass compounding and deceptive marketing.”

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