Oracle Beats Q4 Estimates, but Cloud Business Remains a Challenge

EPS beats estimates

Oracle (ORCL) reported fiscal Q4 2018 financial results on June 19. Its non-GAAP EPS (earnings per share) after adjustments came in at $0.99 per share, easily outpacing the Wall Street estimate of $0.94 per share. Moreover, EPS in the reported quarter increased 11.2% YoY (year-over-year) to $0.89 per share.

Oracle’s largest clients continue to shift their on-premise Oracle databases to the Oracle Cloud, which in turn is driving the database management company’s top line and bottom line. AT&T (T), one of the company’s customers, has moved most of its databases to Oracle cloud.

Oracle Beats Q4 Estimates, but Cloud Business Remains a Challenge

From the graph above, we can see EPS growth for Oracle in the last five quarters. During the period, Oracle’s bottom line has grown at a CAGR (compound annual growth rate) of 2.7%. In the last five quarters, the company easily surpassed analysts’ estimate. Oracle estimates double-digit EPS growth to persist in fiscal 2019 buoyed by the strong revenue performance.

Revenue analysis

In fiscal Q4 2018, Oracle’s top line improved 2% YoY on a constant currency basis to nearly $11.3 billion, fueled by 6% YoY growth in on a CC basis for its cloud services and license support business. However, this growth was offset by a 6% YoY decline on a CC basis for cloud license and on‐premise license businesses.

Oracle’s top line was driven by the strong demand for its popular suites, the Fusion ERP and HCM SaaS cloud platform. The company reported that the revenues from these applications rose more than 50%. The company believes that both Fusion ERP and HCM products will deliver strong growth throughout fiscal 2019.

Margin growth

Non-GAAP operating margins in fiscal Q4 2018 stood at 47% against 46% in the previous quarter. Despite higher marketing and research and development (or R&D) expenses, Oracle maintained stable margin growth.