Oracle Corp. (ORCL, Financial), a major application software company, said net revenues for the quarter ending May 31 increased 3% from the prior-year quarter, driven by strong growth in its Cloud Services and License Support businesses.
The Redwood City, California-based company reported revenue of $11.3 billion for the quarter, outperforming analyst expectations by approximately $0.1 billion. Adjusted earnings of 99 cents per share outperformed expectations by 5 cents.
Company continues strong momentum in cloud businesses
Oracle co-CEO Safra Catz said full-year adjusted earnings of $3.12 per share increased approximately 14% from the prior year “largely driven by strong growth in [the company’s] cloud businesses.” Cloud Services and License Support revenues for the 12 months ending May 31 increased 10% from the prior year.
Catz mentioned on the earnings call that the sustainability and growth of Oracle’s customer base contributed to strong profit margins within the cloud services and license support businesses. Oracle’s gross margin of 79.98% outperforms over 83% of global competitors, suggesting a good economic moat based on Warren Buffett (Trades, Portfolio)'s standards.
Mark Hurd followed up his co-CEO’s comments with key achievements from the quarter, including a 50% revenue growth rate in “strategic Fusion ERP and HCM software-as-a-service cloud application suites” through partnerships with Facebook Inc. (FB, Financial), Johnson & Johnson (JNJ, Financial) and Intel Corp. (INTC, Financial). Additionally, companies like AT&T Inc. (T, Financial) are transferring terabytes of data to the Oracle cloud, increasing strong potential in the company’s platform-as-a-service and infrastructure-as-a-service businesses.
Company offers good growth potential relative to industry
GuruFocus ranks Oracle’s profitability 7 out of 10 as the company’s operating margin, net margin and Greenblatt return on capital outperform over 90% of global competitors despite a low three-year compound annual growth rate of earnings. Table 1 summarizes Oracle’s current ratio, price-sales ratio and profit margins compared to top application software companies.
| Company | Price-sales ratio | Gross margin | Operating margin | Current ratio |
| Oracle Corp. (ORCL, Financial) | 4.95 | 79.98% | 35.59% | 4.33 |
| Microsoft Corp. (MSFT, Financial) | 7.87 | 62.66% | 26.16% | 3.4 |
| International Business Machines Corp. (IBM, Financial) | 1.67 | 45.85% | 14.97% | 1.37 |
| Adobe Systems Inc. (ADBE, Financial) | 15.42 | 86.78% | 31.97% | 2.08 |
| Accenture PLC (ACN, Financial) | 2.74 | 29.90% | 12.60% | 1.31 |
| Application software industry median | 3.98 | 61.31% | -2.00% | 1.51 |
Table 1
See also
GuruFocus launched detailed industry overview pages in April, allowing users to look at various metrics like median price-sales and median return on equity for a specific industry.
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