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Why Oracle’s Revenue Growth Could Fall in the Current Quarter

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Dec. 7 2018, Updated 7:30 a.m. ET

Strengthening dollar could hurt Oracle’s revenue growth expectations

In the previous article, we discussed how Oracle’s (ORCL) revenue growth slowed in the fourth quarter of fiscal 2018 and improved just ~0.5% in the first quarter of fiscal 2019. However, we may not see any revenue growth in the current quarter, which could turn out to be negative. According to the outlook provided by Oracle, it expects its revenue to grow between 0% and 2% in constant currency terms in the quarter, but the strengthening US dollar could hurt its revenue growth expectations.

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The US dollar (UUP) has continued to strengthen this year. Ongoing US-China trade tensions are making investors nervous. Additionally, the Fed has already raised interest rates three times this year and expects to raise rates three times next year. In August, the Turkish lira went through a bad phase that spread to other emerging markets. All these factors are making the US dollar a safe haven for investors, thereby strengthening its value.

Oracle stock has hardly given any returns in the last year

The rising dollar has impacted most multinational companies, as they have to constantly juggle between USD and local currencies. IBM (IBM) and Facebook (FB) both suffered 2% impacts to their revenue growth in the last quarter due to the rising dollar.

The revenue decline in the current quarter could put further pressure on Oracle stock, which has provided hardly any returns over the last year. As the chart above shows, Oracle stock has given only a 2% return in the last year. Comparatively, Microsoft (MSFT) stock has given a healthy 35% return, SAP (SAP) stock has fallen 2%, and IBM stock has fallen 22% in the last year.

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