What To Expect From Oracle’s Q4 After Mixed Results, Soft Guidance
Oracle (NYSE:ORCL) announced its fiscal Q3 results on March 19, reporting a 6% annual increase in revenues to $9.8 billion. In line with expectations, the company reported a strong performance from its Cloud Services division – a trend consistent in recent quarters. Another positive for the company was the steady growth in software licenses and product services segment. Hardware revenues and services revenues, on the other hand, remained fairly suppressed – a trend consistent in recent quarters.
We have summarized the company’s fiscal Q3 results and Q4 outlook, based on the company’s guidance and our own estimates, on our interactive dashboard platform. If you disagree with our forecasts, you can change the key drivers – such as segment revenue and margins – for Oracle to gauge how changes will impact its expected earnings.
Oracle’s combined SaaS, PaaS and IaaS revenues increased 32% y-o-y to $1.6 billion, while software license and product support revenues rose 4% to $6.4 billion. Comparatively, hardware and services revenues fell 2-3% to $1 billion and $800 million, respectively. SaaS margins have improved substantially in the current fiscal year, and the trend continued with 67% gross margins for SaaS through the quarter, which was 2 percentage points higher than the comparable prior year period. The company remains committed to achieving long-term gross margins of around 80% for the Cloud SaaS segment, while IaaS and core business margins will likely see some pressure in the near term.
Oracle’s non-GAAP operating margin stood at just under 44% for the quarter, which was over a percentage point higher than the year-ago quarter. This led to a nearly 10% increase in operating income to $4.3 billion. As a result, net income and EPS were up around 20% on a y-o-y basis to $3.5 billion and $0.83, respectively. However, limited revenue growth and flat margins over the prior year period is expected in the current quarter, due to which the guided EPS is also flat over Q4 FY’17 at around $0.90.
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