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Can Exchange Rates Hurt Oracle’s International Revenue?

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Concern over international business

Oracle’s (ORCL) international revenue, which is comprised of the Asia-Pacific and EMEA (Europe, the Middle East, and Africa) regions, seems to be under some pressure, particularly due to the strengthening of the US dollar against a basket of other currencies.

Revenues from both regions made up ~43% of its overall business. So the impact of the rising dollar, driven by a volatile economic scenario of a trade war between the United States and China and economic turmoil in Argentina and Turkey, may act as a headwind for its international business going forward.

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International revenue performance and outlook

Oracle has reported strong revenue in both the Asia-Pacific and EMEA regions and has sustained its double-digit revenue growth in the last three quarters. However, ongoing economic tensions may hurt its international revenue. Oracle believes there will be a 2% currency headwind on its total revenue in the second quarter of fiscal 2019, mainly from its international business.

From the graph above, you can see Oracle’s revenue growth for its international region on a combined basis for both the Asia-Pacific and EMEA regions in the last five quarters. During the period, revenue grew at a CAGR (compound annual growth rate) of 3%. It ended its first quarter of fiscal 2019 with international revenues of $4 billion, up 12.4% YoY (year-over-year). In the reported quarter, revenue from the Asia-Pacific and EMEA regions improved 12.3% and 12.5%, respectively, YoY.

Another technology firm, Accenture (ACN), reported revenue growth for its international region at a CAGR of 5.1% in the last five quarters, which is higher than Oracle’s international revenue.

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