Oracle Falls After Sales Miss Estimates on Cloud App Growth

Dina Bass

(Bloomberg) — Oracle Corp. declined after reporting sales that fell short of analysts’ estimates, with growth of a key business application for the cloud slowing from the previous quarter.

The world’s second-largest software maker said revenue rose 3.8% to $9.73 billion in the fiscal first quarter. Analysts polled by Bloomberg projected $9.77 billion, on average. Profit, excluding some items, was $1.03 a share, the Austin, Texas-based company said Monday in a statement. Analysts estimated 97 cents a share.

Oracle’s shares hit an all-time high in August as investors cheered progress in the company’s efforts to gain more of a position in the cloud where it was late and lags far behind market leader Inc. as well as Microsoft Corp. and Alphabet Inc.’s Google. Executive Chairman Larry Ellison and Chief Executive Officer Safra Catz have been investing in services to run users applications and store their data in the cloud after initially deriding the space. Still, some customers are holding off shifting critical Oracle databases to the cloud and may opt for Amazon or Microsoft when they do move, Bloomberg Intelligence Analyst Anurag Rana said in a note before results were released.

“It continues to be a bit of an uphill battle for Oracle battling Microsoft and Amazon in this cloud arms race,” said Dan Ives, an analyst at Wedbush Securities.

Revenue from cloud services and license support increased 6% to $7.37 billion, falling just short of analysts’ estimates of $7.4 billion. That metric includes sales from hosting customers’ data in the cloud, but a large portion is generated by maintenance fees for traditional software kept on clients’ corporate servers.

Cloud license and on-premise license sales dropped 8% to $813 million in the period ended Aug. 31. Analysts had expected $865 million.

Shares fell about 2% in extended trading after closing at $88.89 in New York. Oracle’s stock has gained 37% this year, about double the increase in the S&P 500 Index.

Oracle said sales of its Fusion application for managing corporate finances rose 32% in the period — compared with 46% growth reported in the fiscal fourth quarter. Revenue from NetSuite’s financial software, targeted to small- and mid-sized businesses, rose 28%, after a 26% gain in the previous period.

The results marked the fifth straight quarter of year-over-year revenue growth after two consecutive fiscal years of declining sales.

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