Oracle bets on cloud boom to forecast upbeat profit

Businesses increasing spending to support developing trend of hybrid working

Oracle forecast fourth-quarter profit above Wall Street estimates as the legacy software firm expects its heavy cloud investments to pay off, as more businesses ramp up their spending to support hybrid work and transition to cloud.

The company’s strong forecast, which was disclosed on a call with analysts, pulled up its shares from a nearly 6 per cent slide in extended trading triggered by tepid third-quarter profit due to higher spending for its cloud services.

Oracle said it is on track to spend $4 billion (€3.65 billion) in capital expenditure this year as it looks to build more data centres and improve its cloud services that trail behemoths like Microsoft, Amazon and Alphabet's Google.

Edward Jones analyst Logan Purk said Oracle's plan to increase investment in its cloud business was the "right move . . . I do think that's [profit forecast] enough to convince investors Oracle still has room to grow."

Oracle said its third-quarter operating expenses were up as the company invested aggressively to meet customer demand for cloud services. These and licence support costs rose 23 per cent during the quarter, while total operating expenses were up 8 per cent at $6.69 billion.

Missing analysts’ estimates

Excluding items, it earned $1.13 per share for the quarter ended February 28th, missing analysts’ estimates of $1.18.

Oracle chief executive Safra Catz said earnings were hit by "share price declines of equity investments, impacted by the widespread downturn in equity markets last quarter".

Revenue was at $10.51 billion, in line with estimates, according to IBES [Institutional Brokers’ Estimate System] data from Refinitiv.

The company expects fourth-quarter adjusted profit to be between $1.40 and $1.44 per share, ahead of estimates of $1.38. It forecast revenue to grow between 6 per cent to 8 per cent on a constant currency basis. – Reuters