EPS of $0.85 increased by 24.3% from previous year
Gross margin of 70.9%
Net income of 2.40B
""...as demand for our Cloud Services continues getting stronger, our pipeline is growing even faster and our win rates are going higher as well."" - Safra Catz
In Q3 FY2024, Oracle Corporation (ORCL) reported solid financial results, showcasing robust growth in its cloud services segment. Total revenue reached $13.28 billion, reflecting a year-over-year increase of 7.1% and a quarter-over-quarter rise of 2.6%. Cloud revenue was a key highlight, with cloud services revenue excluding Cerner at $4.4 billion, up 26% year-over-year. Management emphasized the strength of the Oracle Cloud Infrastructure (OCI), which emerged as a leading segment, significantly contributing to revenue acceleration. Oracle's ability to outperform many of its competitors has been attributed to its unique AI capabilities and robust cloud deployments, indicating a strong position going forward for investors looking into tech stocks.
Key Performance Indicators
Revenue
13.28B
QoQ: 2.62% | YoY:7.11%
Gross Profit
9.41B
70.87% margin
QoQ: 2.28% | YoY:5.05%
Operating Income
3.75B
QoQ: 3.53% | YoY:11.77%
Net Income
2.40B
QoQ: -4.08% | YoY:26.64%
EPS
0.87
QoQ: -4.40% | YoY:24.29%
Revenue Trend
Margin Analysis
Key Insights
Total Revenue: $13.3 billion (up 7% YoY, up 2.6% QoQ)
Balance Sheet Highlights:
- Cash and Short-Term Investments: $9.90 billion
- Total Assets: $137.08 billion
- Total Liabilities: $130.90 billion
- Total Stockholders' Equity: $5.62 billion
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
13.28B
7.11%
2.62%
Gross Profit
9.41B
5.05%
2.28%
Operating Income
3.75B
11.77%
3.53%
Net Income
2.40B
26.64%
-4.08%
EPS
0.87
24.29%
-4.40%
Key Financial Ratios
currentRatio
0.85
grossProfitMargin
70.9%
operatingProfitMargin
28.2%
netProfitMargin
18.1%
returnOnAssets
1.75%
returnOnEquity
42.7%
debtEquityRatio
15.65
operatingCashFlowPerShare
$1.99
freeCashFlowPerShare
$1.38
dividendPayoutRatio
45.8%
priceToBookRatio
54.58
priceEarningsRatio
31.96
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Strategic Insights from Management: Safra Catz, CEO: "OCI has emerged as the largest driver of our overall revenue acceleration growing much, much faster than our cloud competitors... total revenue came in at the midpoint of my constant-currency guidance and EPS was above the high-end of guidance."
Larry Ellison, CTO: "...we are building large numbers of data centers, and we were - and some of those data centers are smallish, but some of those data centers are the largest AI data centers in the world... demand for our cloud regions is extraordinarily high."
These statements emphasize Oracle's strategic priority on cloud service expansion and technological leadership, particularly in AI-driven applications.
"...as demand for our Cloud Services continues getting stronger, our pipeline is growing even faster and our win rates are going higher as well."
â Safra Catz
"We are working as quickly as we can to get the cloud capacity built out given the enormity of our backlog and pipeline."
â Safra Catz
Forward Guidance
Management has provided optimistic guidance for Q4 FY2024, projecting total revenues including Cerner to grow between 4% to 6%, while total revenue excluding Cerner is expected to increase 6% to 8%. Non-GAAP EPS is anticipated between $1.62 and $1.66, reflecting a decline of 2% to flat growth from the prior year, largely due to a high tax rate comparison from last year. Overall, the expectation for FY2025 remains positive, with a strong pipeline of contracts indicating significant future revenue potential.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
ORCL Focus
70.87%
28.20%
42.70%
31.96%
PANW
74.10%
9.09%
6.24%
84.23%
CRWD
75.20%
0.40%
1.31%
396.59%
MSFT
70.10%
44.60%
8.67%
35.95%
SQ
33.80%
-0.18%
-0.16%
-233.60%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Given Oracle's strong Q3 FY2024 performance and future growth initiatives, the investment outlook is positive. The emphasis on expanding cloud services, coupled with the strategic integration of AI, positions Oracle favorably in the tech sector, especially amidst a backdrop of increasing digital transformation demands. Investors should monitor upcoming contract signings and revenue recognitions closely, as these factors will significantly influence the company's financial trajectory.
Key Investment Factors
Growth Potential
Oracle's growth potential lies in its aggressive expansion of cloud services, particularly within the OCI segment which is experiencing rapid adoption in both public and private sector markets. The strategic focus on AI integration across its platform presents a unique value proposition for diverse customer needs.
Profitability Risk
Key risks include the competitive landscape with major players like Microsoft Azure and AWS, potential supply chain constraints affecting infrastructure growth, and uncertain regulatory environments in various international markets. Additionally, reliance on large contracts poses risks if key customers decide to shift providers.
Financial Position
Oracle's financial position is robust, characterized by $9.9 billion in cash and short-term investments, alongside substantial annual cash flow generation totaling $18.2 billion. The company's long-term debt, while high at $82.5 billion, is manageable with strong interest coverage ratios standing at 4.28, providing a buffer against financial distress.
SWOT Analysis
Strengths
Leading cloud infrastructure services with strong growth rates
Robust financial performance with high margins
Innovative integration of AI into cloud applications
Weaknesses
Heavy reliance on a small number of large contracts for revenue
Substantial debt levels relative to equity
Opportunities
Expanding global market for cloud services, especially in underserved regions
Increasing governmental contracts for AI-enhanced solutions
Threats
Intense competition from major cloud service providers
Potential regulatory challenges in various jurisdictions