Image Source: Peter Kaminski
By Brian Nelson, CFA
On March 11, Oracle (ORCL) reported strong third-quarter fiscal 2024 results that showed total revenue advancing 7% on both a GAAP and constant-currency basis, roughly in-line with expectations, and non-GAAP earnings per share increasing 16%, to $1.41, beating the consensus forecast. Revenue growth rates were strong across the board, and the company’s total Remaining Performance Obligations soared 29%, to $80 billion at the end of the period. Though the quarter was solid, what the Street liked the most was management’s commentary in the press release:
Large new cloud infrastructure contracts signed in Q3 drove Oracle’s total Remaining Performance Obligations up 29% to over $80 billion—an all-time record. We expect to continue receiving large contracts reserving cloud infrastructure capacity because the demand for our Gen2 AI infrastructure substantially exceeds supply—despite the fact we are opening new and expanding existing cloud datacenters very, very rapidly. We expect that 43% of our current $80 billion of Remaining Performance Obligations will be recognized as revenue over the next four quarters, and that our Gen2 Cloud Infrastructure business will remain in a hypergrowth phase—up 53% in Q3—for the foreseeable future.
For the third quarter of fiscal 2024, cloud revenue advanced 24%, while cloud infrastructure revenue leapt 49%, both measures on a constant-currency basis. Cloud Application, Fusion Cloud ERP, and NetSuite Cloud ERP increased 14%, 18%, and 21%, respectively, on a constant-currency basis. The company posted a non-GAAP operating margin of 44%, helping to drive non-GAAP operating income 12% higher than the year-ago quarter. Non-GAAP net income was up 18% both on a GAAP and constant-currency basis.
All in all, Oracle posted solid third-quarter fiscal 2024 results, drove nice growth across its cloud business, set an all-time record with respect to Remaining Performance Obligations, and spoke very positively (“hypergrowth”) about its Gen2 Cloud Infrastructure business. Oracle has a large net debt position due in part to its purchase of Cerner, but free cash flow of ~$8.52 billion for the first nine months of its fiscal year showcased robustness and a nice improvement on a year-over-year basis, as both operating cash flow advanced while capital spending fell. We continue to like Oracle as an idea in the Dividend Growth Newsletter portfolio.
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Brian Nelson owns shares in SPY, SCHG, QQQ, DIA, VOT, RSP, and IWM. Valuentum owns SPY, SCHG, QQQ, VOO, and DIA. Brian Nelson’s household owns shares in HON, DIS, HAS, NKE, DIA, RSP, SCHG, QQQ, QQQM, and VOO. Some of the other securities written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.
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