Oracle shares jump on Google and OpenAI deals despite earnings miss

Larry
Ellison,
co-founder,
chairman
and
chief
technology
officer
of
Oracle,
speaks
during
the
Oracle
OpenWorld
conference
in
San
Francisco
on
Oct.
1,
2017.

David
Paul
Morris
|
Bloomberg
|
Getty
Images

Oracle
shares
jumped
as
much
as
11%
in
extended
trading
on
Tuesday
after
the
software
maker
announced
cloud
deals
with
Google
and
OpenAI,
despite
fourth-quarter
results
that
fell
short
of
Wall
Street
expectations.

Here’s
how
the
company
did
in
comparison
with
LSEG
consensus:

Earnings
per
share:
$1.63
adjusted
vs.
$1.65
expected
Revenue:
$14.29
billion,
vs.
$14.55
billion
expected

Oracle’s
revenue
increased
3%
year
over
year
during
the
quarter,
which
ended
on
May
31,
according
to
a

statement.
Net
income,
at
$3.14
billion,
or
$1.11
per
share,
was
down
from
$3.32
billion,
or
$1.19
per
share,
in
the
year-ago
quarter.

The
cloud
services
and
license
support
segment
generated
$10.23
billion
in
revenue,
up
9%
and
slightly
below
the
StreetAccount
consensus
of
$10.29
billion.

The
company’s
cloud
and
on-premises
licenses
business
contributed
$1.84
billion
in
revenue.
That’s
down
15%
and
lower
than
the
$2.09
billion
StreetAccount
consensus.

Cloud
infrastructure
revenue
came
to
$2.0
billion,
up
42%,
which
was
a
deceleration
from
the
49%
growth
rate
in
the
prior
quarter.
The
cloud
business
remains
smaller
than
rivals

Amazon
Web
Services
and

Microsoft
Azure
but
is
growing
faster.

With
respect
to
guidance,
Oracle
sees
fiscal
first-quarter
earnings
of
$1.31
to
$1.35
per
share
and
5%
to
7%
revenue
growth.
Analysts
polled
by
LSEG
were
looking
for
$1.32
per
share
on
an
adjusted
basis
and
$13.39
billion
in
revenue,
which
implies
7.6%
growth.

Oracle
said
in
a

statement
on
Tuesday
that
it
would
bring
its
database
to

Google’s
cloud,
with
availability
coming
in
November.
Organizations
will
be
able
to
deploy
workloads
in
Google
and
Oracle
cloud
data
center
regions
without
being
subject
to
data-transfer
charges,
Oracle
said.

Last
September,

Microsoft
said
its
clients
would
be
able
to
use
Oracle
database
from
the
Azure
cloud.

“The
adoption
has
actually
been
really,
really
strong,”
Clay
Magouyrk,
the
Oracle
executive
vice
president
in
charge
of
cloud
infrastructure,
said
in
an
interview
with
CNBC
on
Tuesday.

The
idea
is
to
broaden
out
availability
of
Oracle’s
flagship
database
software
even
further.

“We
would
love
to
do
the
same
thing
with
AWS,”
Larry
Ellison,
Oracle’s
co-founder,
chairman
and
technology’s
chief
said
on
Oracle’s
Tuesday
earnings
call.
AWS,
which
stands
for

Amazon
Web
Services,
is
the
world’s
leading
public
cloud.

Many
e-commerce
companies
depending
on
Oracle’s
database
would
like
to
embrace
AI
to
deliver
a
better
shopping
experience
and
conversational
commerce,
Google
Cloud
CEO
Thomas
Kurian,
himself
a
former
top-ranking
Oracle
executive,
told
CNBC.
“It
used
to
be
quite
complex
for
them
to
do
that.
Now
it
will
be
trivial
for
them
to
do
that.”

In
a
separate
statement,
Oracle

said
it’s
partnering
with

Microsoft
and
OpenAI
to
deliver
supplemental
computing
capacity.

“Microsoft
remains
OpenAI’s
exclusive
cloud
provider
and
partnered
with
them
to
form
this
deal
with
Oracle
to
extend
Azure
AI
capacity,”
a
Microsoft
spokesperson
said.

But
now
OpenAI
will
also
draw
on
Oracle
cloud
infrastructure,
including

Nvidia
graphics
processing
units,
to
train
AI
models,
Ellison,
said
on
the
earnings
call.

“We
are
working
as
quickly
as
we
can
to
get
cloud
capacity
built
out,
given
the
enormity
of
our
backlog
and
pipeline,”
Oracle
CEO
Safra
Catz
said
on
the
conference
call.

Ellison
said
the
company
is
building
some
of
the
world’s
largest
data
centers.

“Some
are
getting
close
to,
dare
I
say
it,
a
gigawatt,
which
is
a
pretty
good-sized
city
or
one
enormous
AI
cloud
training
data
center,”
Ellison
said.

During
the
quarter,
Oracle
said
its

database
software
would
be
available
in
five
additional
Azure
regions,
bringing
the
total
to
15.
Oracle
also
announced
generative
AI
features
coming
to
its

Fusion
cloud
applications
for
supply
chain
and
human
resources.

Plus,
Oracle
left
the
advertising
business
in
the
quarter,
which
had
declined
to
around
$300
million
in
revenue
during
the
fiscal
year,
Catz
said.
The
database
vendor
had
spent
billions
acquiring
marketing
companies
such
as
BlueKai
and
Moat
in
years
past,
but
updates
on
momentum
have
been
infrequent.
In
March
2020,
Catz
told
analysts
that
the
Data
Cloud
unit
was
seeing
revenue
growth
in
the
low
single
digits.