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Oracle Stock Stumbles on Q3 Earnings Miss, Revenues Rise Y/Y
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Oracle (ORCL - Free Report) reported third-quarter fiscal 2025 non-GAAP earnings of $1.47 per share, which missed the Zacks Consensus Estimate by 0.68% but increased 4.3% year over year in USD and 7% in constant currency (cc).
Revenues rose 6% in USD (8% in cc) year over year to $14.13 billion, driven by continued momentum from its Oracle Cloud Infrastructure (“OCI”) business, including from winning cloud-computing contracts from AI-focused startups. The figure missed the Zacks Consensus Estimate by 1.59%, disappointing investors’ enthusiasm for the company’s ascendant cloud business.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Shares of this Zacks Rank #4 (Sell) company were choppy after it reported third-quarter EPS and revenues that trailed estimates. The shares, which gained as much as 6% after the results were released, declined about 3.7% in extended trading. Shares have lost 10.5% so far this year, after Oracle stock rallied nearly 60% in 2024 for the company's biggest annual gain since 1999.
Sales of Oracle's closely watched cloud-infrastructure business increased 49% compared with 52% growth for the segment in Oracle's November-ended quarter. ORCL's cloud infrastructure business is racing to build out computing capacity for AI startups and other users of the cloud. The company has long tried to find its footing in the lucrative industry of renting computing power and storage, which is dominated by much larger rivals led by Amazon.com (AMZN - Free Report) -owned Amazon Web Services, Alphabet (GOOGL - Free Report) -owned Google and Microsoft (MSFT - Free Report) .
Revenues from the Americas increased 8.8% year over year to $9 billion and accounted for 63.7% of total revenues. Europe/Middle East/Africa climbed 3.2% year over year to $3.42 billion and contributed 24.2% of total revenues. The remaining revenues came from Asia Pacific, which increased 0.9% year over year to $1.7 billion.
Oracle Corporation Price, Consensus and EPS Surprise
Cloud services and license support revenues increased 10% year over year and 12% in cc to $11 billion, driven by OCI, strategic cloud applications and cloud database services. Cloud license and on-premise license revenues declined 10% year over year (down 8% at cc) to $1.12 billion.
Total cloud revenues (SaaS plus IaaS) were up 23% in both USD and 25% in cc at $6.2 billion. Cloud Infrastructure (IaaS) revenues came in at $2.7 billion, up 49% year over year and 51% at cc. Cloud Application (SaaS) revenues of $3.6 billion increased 9% year over year and 10% at cc.
Fusion Cloud ERP (SaaS) revenues came in at $0.9 billion, up 16% year over year and 18% at cc. NetSuite Cloud ERP (SaaS) revenues of $0.9 billion increased 16% year over year and 17% at cc.
Hardware revenues were $703 million, down 7% year over year (down 5% in cc). Services revenues decreased 1% (up 1% at cc) to $1.29 billion.
Oracle is currently live in 18 cloud regions with database-at-cloud services and has another 40 planned with Azure, Google and AWS. Database subscription services, which include database license support, were up 6%. Application subscription revenues, which include product support, were $4.8 billion, up 6% year over year.
The company’s strategic back-office SaaS applications now have annualized revenues of $8.6 billion and were up 8%. Software license revenues were down 8% to $1.1 billion.
Infrastructure subscription revenues, which include license support, were $6.2 billion, up 18%. Record level AI demand drove Oracle Cloud Infrastructure revenues, which increased 51%. Excluding legacy hosting infrastructure, cloud services revenues were up 54%. Infrastructure cloud services now have annualized revenues of $10.6 billion.
OCI consumption revenues were up 57% as demand continued to outstrip supply. Growth in the AI segment of the infrastructure business was extraordinary. GPU consumption revenues are now nearly 3.5 times the size of last year's. Cloud database services, which were up 28%, now have annualized revenues of $2.3 billion. Autonomous Database consumption revenues were up 42% on top of the 32% growth reported last year.
Operating Details of Oracle
The non-GAAP total operating expenses increased 6% year over year and 8% in cc to $7.93 billion.
The non-GAAP operating income was $6.19 billion, up 7% year over year and 9% at cc. The non-GAAP operating margin was 44%, which expanded 23 basis points on a year-over-year basis.
ORCL’s Balance Sheet & Cash Flow
As of Feb. 28, 2023, Oracle had cash & cash equivalents and marketable securities of $17.8 billion compared with $11.3 billion as of Nov. 30, 2024.
Operating cash flow and free cash flow amounted to $20.7 billion and $5.81 billion, respectively.
The company’s remaining performance obligation (RPO) is more than $130 billion, up 63% at constant currency, reflecting the growing trend of customers wanting larger and longer contracts as they see firsthand how Oracle Cloud Services are benefiting their businesses.
Cloud RPO grew more than 90% and now represents more than 80% of total RPO. Roughly 31% of total RPO is expected to be recognized as revenues over the next 12 months.
The company purchased 1 million shares for a total of $150 million. Oracle also announced that its board of directors declared a quarterly cash dividend of 50 cents per share of outstanding common stock, reflecting a 25% increase over the current quarterly dividend of 40 cents. This increased dividend will be paid to stockholders of record as of the close of business on April 10, 2025, with a payment date of April 23, 2025.
Key Q3 Take Aways
Oracle is in the process of building a gigantic 64,000 GPU, liquid-cooled NVIDIA GB 200 cluster for AI training. The company’s multi-cloud business at Amazon, Google and Microsoft grew 200% in the last three months alone.
In the third quarter, we signed a multi-billion-dollar contract with AMD to build a cluster of 30,000 of their latest MI355x GPUs. ORCL announced that four of the leading cloud security companies, including CrowdStrike, Cyber Reason, Newfold Digital and Palo Alto, decided to migrate to the Oracle Cloud in the reported quarter.
Oracle signed cloud agreements with several world-leading technology companies, including OpenAI, xAI, Meta, NVIDIA and AMD. The company expects that the huge $130 billion sales backlog will help drive a 15% increase in Oracle’s overall revenues in fiscal 2026 beginning June 2025.
Guidance
For the third quarter of fiscal 2025, total revenues are expected to grow in the band of 9-11% in constant currency and between 8% and 10% in USD at today's exchange rate. Total cloud revenues are expected to grow in the range of 24-28% at constant currency and 25-27% in USD.
Non-GAAP EPS is expected to grow in the band of 0-2% and between $1.62 and $1.66 in constant currency. Non-GAAP EPS is expected to grow between $1.61 and $1.65 in USD.
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Oracle Stock Stumbles on Q3 Earnings Miss, Revenues Rise Y/Y
Oracle (ORCL - Free Report) reported third-quarter fiscal 2025 non-GAAP earnings of $1.47 per share, which missed the Zacks Consensus Estimate by 0.68% but increased 4.3% year over year in USD and 7% in constant currency (cc).
Revenues rose 6% in USD (8% in cc) year over year to $14.13 billion, driven by continued momentum from its Oracle Cloud Infrastructure (“OCI”) business, including from winning cloud-computing contracts from AI-focused startups. The figure missed the Zacks Consensus Estimate by 1.59%, disappointing investors’ enthusiasm for the company’s ascendant cloud business.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Shares of this Zacks Rank #4 (Sell) company were choppy after it reported third-quarter EPS and revenues that trailed estimates. The shares, which gained as much as 6% after the results were released, declined about 3.7% in extended trading. Shares have lost 10.5% so far this year, after Oracle stock rallied nearly 60% in 2024 for the company's biggest annual gain since 1999.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Sales of Oracle's closely watched cloud-infrastructure business increased 49% compared with 52% growth for the segment in Oracle's November-ended quarter. ORCL's cloud infrastructure business is racing to build out computing capacity for AI startups and other users of the cloud. The company has long tried to find its footing in the lucrative industry of renting computing power and storage, which is dominated by much larger rivals led by Amazon.com (AMZN - Free Report) -owned Amazon Web Services, Alphabet (GOOGL - Free Report) -owned Google and Microsoft (MSFT - Free Report) .
Revenues from the Americas increased 8.8% year over year to $9 billion and accounted for 63.7% of total revenues. Europe/Middle East/Africa climbed 3.2% year over year to $3.42 billion and contributed 24.2% of total revenues. The remaining revenues came from Asia Pacific, which increased 0.9% year over year to $1.7 billion.
Oracle Corporation Price, Consensus and EPS Surprise
Oracle Corporation price-consensus-eps-surprise-chart | Oracle Corporation Quote
Top-Line Details
Cloud services and license support revenues increased 10% year over year and 12% in cc to $11 billion, driven by OCI, strategic cloud applications and cloud database services. Cloud license and on-premise license revenues declined 10% year over year (down 8% at cc) to $1.12 billion.
Total cloud revenues (SaaS plus IaaS) were up 23% in both USD and 25% in cc at $6.2 billion. Cloud Infrastructure (IaaS) revenues came in at $2.7 billion, up 49% year over year and 51% at cc. Cloud Application (SaaS) revenues of $3.6 billion increased 9% year over year and 10% at cc.
Fusion Cloud ERP (SaaS) revenues came in at $0.9 billion, up 16% year over year and 18% at cc. NetSuite Cloud ERP (SaaS) revenues of $0.9 billion increased 16% year over year and 17% at cc.
Hardware revenues were $703 million, down 7% year over year (down 5% in cc). Services revenues decreased 1% (up 1% at cc) to $1.29 billion.
Oracle is currently live in 18 cloud regions with database-at-cloud services and has another 40 planned with Azure, Google and AWS. Database subscription services, which include database license support, were up 6%. Application subscription revenues, which include product support, were $4.8 billion, up 6% year over year.
The company’s strategic back-office SaaS applications now have annualized revenues of $8.6 billion and were up 8%. Software license revenues were down 8% to $1.1 billion.
Infrastructure subscription revenues, which include license support, were $6.2 billion, up 18%. Record level AI demand drove Oracle Cloud Infrastructure revenues, which increased 51%. Excluding legacy hosting infrastructure, cloud services revenues were up 54%. Infrastructure cloud services now have annualized revenues of $10.6 billion.
OCI consumption revenues were up 57% as demand continued to outstrip supply. Growth in the AI segment of the infrastructure business was extraordinary. GPU consumption revenues are now nearly 3.5 times the size of last year's. Cloud database services, which were up 28%, now have annualized revenues of $2.3 billion. Autonomous Database consumption revenues were up 42% on top of the 32% growth reported last year.
Operating Details of Oracle
The non-GAAP total operating expenses increased 6% year over year and 8% in cc to $7.93 billion.
The non-GAAP operating income was $6.19 billion, up 7% year over year and 9% at cc. The non-GAAP operating margin was 44%, which expanded 23 basis points on a year-over-year basis.
ORCL’s Balance Sheet & Cash Flow
As of Feb. 28, 2023, Oracle had cash & cash equivalents and marketable securities of $17.8 billion compared with $11.3 billion as of Nov. 30, 2024.
Operating cash flow and free cash flow amounted to $20.7 billion and $5.81 billion, respectively.
The company’s remaining performance obligation (RPO) is more than $130 billion, up 63% at constant currency, reflecting the growing trend of customers wanting larger and longer contracts as they see firsthand how Oracle Cloud Services are benefiting their businesses.
Cloud RPO grew more than 90% and now represents more than 80% of total RPO. Roughly 31% of total RPO is expected to be recognized as revenues over the next 12 months.
The company purchased 1 million shares for a total of $150 million. Oracle also announced that its board of directors declared a quarterly cash dividend of 50 cents per share of outstanding common stock, reflecting a 25% increase over the current quarterly dividend of 40 cents. This increased dividend will be paid to stockholders of record as of the close of business on April 10, 2025, with a payment date of April 23, 2025.
Key Q3 Take Aways
Oracle is in the process of building a gigantic 64,000 GPU, liquid-cooled NVIDIA GB 200 cluster for AI training. The company’s multi-cloud business at Amazon, Google and Microsoft grew 200% in the last three months alone.
In the third quarter, we signed a multi-billion-dollar contract with AMD to build a cluster of 30,000 of their latest MI355x GPUs. ORCL announced that four of the leading cloud security companies, including CrowdStrike, Cyber Reason, Newfold Digital and Palo Alto, decided to migrate to the Oracle Cloud in the reported quarter.
Oracle signed cloud agreements with several world-leading technology companies, including OpenAI, xAI, Meta, NVIDIA and AMD. The company expects that the huge $130 billion sales backlog will help drive a 15% increase in Oracle’s overall revenues in fiscal 2026 beginning June 2025.
Guidance
For the third quarter of fiscal 2025, total revenues are expected to grow in the band of 9-11% in constant currency and between 8% and 10% in USD at today's exchange rate. Total cloud revenues are expected to grow in the range of 24-28% at constant currency and 25-27% in USD.
Non-GAAP EPS is expected to grow in the band of 0-2% and between $1.62 and $1.66 in constant currency. Non-GAAP EPS is expected to grow between $1.61 and $1.65 in USD.