After the closing bell on June 15, Oracle Corp. (ORCL, Financial) reported earnings results for its fiscal fourth quarter and full year 2021, which ended on May 31.
The quarterly results beat analysts' estimates on both the top and bottom line and represented strong year-over-year growth, benefitting from an easy comparison versus last year and strong growth in cloud services.
Earnings results
For full fiscal 2021, the company reported revenue of $40.5 billion, growing 4% year over year. Both cloud services and license support and cloud license and on-premise license revenues grew 5%. GAAP earnings per share increased 48% to $4.55 and non-GAAP earnings per share was up 21% to $4.67.
For the fourth quarter, Oracle’s GAAP earnings per share grew 39% to $1.37, while adjusted earnings were up 29% to $1.54. Revenue grew 8% year over year to $11.23 billion. Analysts had been expecting adjusted earnings of $1.31 per share on revenue of $11.04 billion.
By segment, cloud services and license support revenue was up 8% to $7.4 billion, while cloud license and on-premise license revenue increased 9% to $2.1 billion. Hardware revenue declined 2% to $882 million, while services revenue was up 11% to $812 million.
On a GAAP basis, operating income was up 5% to $4.5 billion and the operating margin was 40%. Non-GAAP operating income was up 6% to $5.4 billion and the non-GAAP operating margin was 49%. At $15.9 billion, the operating cash flow set a new company record, up 21% compared to a year ago.
As of the quarter’s end, the company held cash and cash equivalents of $30.09 billion, down from $37.23 billion a year ago.
The board of directors declared a quarterly cash dividend of 32 cents per share of outstanding common stock, which will be paid to stockholders of record as of the close of business on July 15 with a payment date of July 29.
Looking forward
Oracle Chairman Larry Ellison had the following to say regarding the company’s outlook:
"The world's two most popular databases are the Oracle Autonomous Database and Oracle MySQL… while our Oracle Database business as measured by revenue currently dwarfs our MySQL database business—that is about to change because the latest version of Oracle MySQL has been upgraded to include a revolutionary new ultra-high-performance parallel processing query engine called HeatWave. Independent analysts have tested and confirmed that Oracle MySQL with HeatWave runs 10 to 100 times faster than Amazon's (AMZN) version of MySQL called Aurora.”
This technological breakthrough could prove highly profitable for Oracle as existing customers may look into making the switch to a faster product, and new customers may be more likely to partner with Oracle.
For the first quarter of fiscal 2022, which ends in August, analysts are predicting adjusted earnings of $1.03 per share and revenue of $11.04 billion, which would represent year-over-year growth numbers that are fairly similar to fourth-quarter 2021. However, Oracle itself guides for fiscal Q1 adjusted EPS in the range of $0.94 to $0.98 and expects revenue to grow by only 3% to 5% as it ups investments in cloud computing.
“We expect to roughly double our cloud capex spend in FY 2022 to nearly $4 billion,” said CEO Safra Catz. “We are confident that the increased return in the cloud business more than justifies this increased investment, and our margins will expand over time.”
Valuation
Shares of Oracle closed at $81.64 on Tuesday for a market cap of $235.41 billion. According to the GuruFocus Value chart, the stock is modestly overvalued based on a combination of historical returns and analyst estimates of future earnings.
The price-earnings ratio of 19.55 is considerably lower than the industry median of 32.29, but slightly above the company’s own 10-year median of 18.11.
Considering the expectation for strong growth in the cloud market, Oracle could see its earnings multiples expand in the future, especially if it manages to gain a technological foothold over competitors. All things considered, it seems like Oracle is trading at a fair price considering its growth prospects.
