Earnings Preview: What to look for when Oracle (ORCL) reports Q1 results

Oracle Corporation (NYSE: ORCL) is preparing to report first-quarter earnings early next week amid expectations for a mixed outcome. The tech giant offers a comprehensive platform that empowers customers to develop and deploy AI models efficiently, making it a prime choice for hyper-scalers seeking to manage extensive AI workloads.  

After withdrawing from last month’s record high, Oracle’s stock is once again trading close to the peak. With the value more than doubling in the past two years, ORCL is one of the best-performing stocks. The positive investor mood mainly reflects high demand from large customers, especially those looking to run AI workloads in the company’s rapidly expanding data centers.  

Estimates

It is estimated that the Austin-headquartered software firm had a mixed start to the year – the consensus earnings estimate of $1.20 per share for the first quarter is slightly higher than the $1.19 per share reported in the year-ago quarter. Analysts forecast $11.96 billion in revenues for the August quarter, compared to $12.45 billion in the corresponding period of 2024. The actual numbers will be unveiled on Monday, September 9, at 4:05 pm ET.

The Oracle leadership expects revenue, earnings, and cash flow growth to accelerate going forward, thanks to continued steady demand and new partnerships. A few months ago, the company inked a pact with Microsoft and OpenAI, under which the Azure Al platform would be extended to Oracle Cloud Infrastructure to provide additional capacity for OpenAl. It also signed a multi-cloud partnership with Google, allowing customers to combine Oracle Cloud Infrastructure and Google Cloud technologies to accelerate their application migrations and modernization.

Data Center Push

To meet the growing demand for cloud-based and AI-supported applications, the company has been building large data centers lately. Earlier this year, the management revealed plans to invest a whopping $10 billion to expand the company’s data center footprint, which will include the largest data centers in the world.

From Oracle’s Q4 2024 earnings call:

“Customers have progressed from their initial curiosity about Oracle Cloud into full-blown rollouts. We have the most secure, complete, and cost-effective set of enterprise applications and infrastructure cloud technologies of any vendor. Not only are our cloud technologies vertically integrated to work together, but we offer flexible deployment models like public cloud, multi-cloud, sovereign cloud, dedicated cloud, or any other way our customers ask us to deliver. And we also offer Oracle Alloy, where Oracle partners become cloud providers, offering customized cloud services along — alongside the Oracle Cloud.”

Q4 Outcome

In the final three months of fiscal 2024, earnings missed estimates for the first time in six quarters. The top line also fell short of expectations in Q1 despite rising 3% year-over-year to $14.29 billion. A 9% increase in Cloud Services and License Support revenue more than offset weakness in the other operating segments. Meanwhile, at $1.63 per share, adjusted profit was down 2%. Operating margin rose sharply to 33% in the May quarter.

Oracle’s shares have gained an impressive 17% in the past three months alone. On Wednesday, they traded slightly above $140, maintaining an uptrend throughout the session.