Oracle stock falls despite earnings beat, CEO expects to push more money toward cloud efforts

For the full fiscal year, Oracle totaled $40.48 billion in sales, up 3.6% from its previous fiscal year. Oracle revenue had declined 1.1% and 0.8% in the past two years, respectively, and sales have declined four times in the past six years overall. The growth rate for the 2021 fiscal year is the second-best for Oracle since the end of the 2012 fiscal year.

Earnings also increased for the full year, though much of the gains in earnings-per-share are a result of massive share repurchases. Oracle repurchased $20.9 billion in stock as the COVID-19 pandemic raged in the past 12 months, and has now spent more than $76 billion in the past three fiscal years purchasing its own stock.

For the new fiscal year, Chief Executive Safra Catz predicted that revenue growth will continue, but said Oracle will begin funneling more cash into its cloud business. The software provider expects to push $4 billion into capital expenditures to increase its competition with Amazon.com Inc. AMZN, -0.02%, Microsoft Corp. MSFT, -0.59% and others.

“I see total revenue for fiscal 2022 growing faster than fiscal 2021, with constant currency revenue growth somewhere in the mid-single digits,” Catz said in a conference call Tuesday afternoon. “Given our increasing confidence in revenue growth and our unique and differentiated position in the market, we are going to invest back in the business at a greater rate so we can further accelerate the top line.”

Catz outlined what that increased investment will look like in the first quarter, predicting adjusted earnings of 93 cents to 98 cents a share, after Oracle produced 93 cents a share in the first quarter of the completed year. Analysts on average were predicting adjusted earnings of $1.03 a share, according to FactSet.

Shares fell more than 4% in after-hours trading, with declines growing during the conference call. Oracle stock has been soaring of late, gaining 31.9% in the past six months, with the S&P 500 SPX, -0.20% increasing 15.2% in that time. Shares closed at an all-time high of $84.61 on June 8, and finished Tuesday’s session at $81.60.

JPMorgan analysts question how much Oracle shares can continue to appreciate, as “a good chunk of the value-rotation uplift has now played out.”

“Our checks do support the potential for Oracle to displace some very large competitor ERP footprints, and the $5 EPS threshold is drawing nearer as a favorable milestone, but with much less dry powder for exercising share buybacks, growing earnings will become a different challenge in the future because it must be driven relatively more by core operations,” the analysts, who have an overweight rating and $73 price target on the stock, wrote in a note this week.