Oracle's Earnings Stability Soars Thanks to Cloud Despite Negative Market Conditions

[Asia Economy Reporter Minji Lee] Oracle is expected to maintain stable revenue through continued growth in its cloud division despite a negative business environment.

According to Oracle (a company with a fiscal year ending in May) on the 18th, its revenue for the first quarter of 2023 reached $11.45 billion, slightly surpassing the market expectation of $11.44 billion. This represents a 17.7% increase compared to the same period last year. Earnings per share were $1.03, falling short of the expected $1.06.

By business segment, the cloud and on-premises divisions, which account for about 90% of revenue, recorded $8.417 billion, marking a 14% growth compared to the same period last year. The new license segment increased by 11% to $940 million. Hardware revenue was $763 million, and the services segment recorded $1.361 billion. Cerner, an electronic health record (EHR) software company, posted revenue of $1.4 billion.

A key point to watch in this earnings report is the strengthening momentum of cloud growth. Excluding the Cerner acquisition, cloud revenue including IaaS and SaaS grew by about 30%, reaching $3.1 billion. IaaS revenue increased by 58% to $900 million, and excluding legacy hosting services, it grew approximately 70%. Jaeyim Kim, a researcher at Hana Securities, stated, “Oracle reaffirmed its cloud outlook exceeding 30% growth for 2023. Although there were doubts about achieving this, the recent results demonstrate confidence in the cloud business.”

Additionally, benefits from multi-cloud partnerships are expected. Oracle Database services were previously only available on Oracle IaaS, but now interconnectivity with Amazon AWS has been enabled following Microsoft Azure. Researcher Jaeyim Kim said, “Adopting a multi-cloud strategy will provide growth opportunities for Oracle and positively impact its market share expansion.”

Foreign investment banks also hold a positive outlook on Oracle. The expected revenue for the second quarter is $11.62 billion, with earnings per share of $1.27. Guggenheim commented, “By nurturing its cloud business, Oracle can grow into a hyperscale company. The acquisition of Cerner has further strengthened its cloud competitiveness.”

However, concerns about exchange rates and costs are predicted to limit profitability. Hyunji Park, a researcher at NH Investment & Securities, forecasted, “The annual operating margin for 2023 is expected to be around 32.1%, higher than last year’s 25.7%, but due to increased marketing and sales expenses and exchange rate rises, it will not reach the pre-COVID-19 level of 34.2%.”

This content was produced with the assistance of AI translation services.