Oracle Reports Mixed Q3 Results Amid Strong Cloud Growth

Oracle (ORCL) announced its third-quarter fiscal 2025 results, revealing non-GAAP earnings of $1.47 per share. This result fell short of the Zacks Consensus Estimate by 0.68% but marked a 4.3% increase year-over-year in USD and a 7% rise in constant currency (cc).

In terms of revenue, Oracle’s figures climbed 6% in USD (8% in cc) year-over-year to reach $14.13 billion. This growth was mainly driven by ongoing momentum from its Oracle Cloud Infrastructure (“OCI”) segment, which has recently secured cloud-computing contracts with AI-driven startups. However, this revenue figure did not meet the Zacks Consensus Estimate, leading to a decline in investor confidence regarding the company’s thriving cloud operations.

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Following the earnings report, shares of this Zacks Rank #4 (Sell) company experienced volatility. Initially rising up to 6% post-results, they subsequently declined about 3.7% in after-hours trading. Year-to-date, Oracle shares have dropped 10.5%, despite a robust 60% rise in 2024, marking the company’s most significant annual gain since 1999.

The cloud-infrastructure segment, a critical focus for Oracle, saw a remarkable sales increase of 49%. This growth was slightly lower than the 52% rise reported in the last quarter. The demand for OCI is particularly strong as it prepares to meet the needs of AI startups and other cloud users, all while competing against larger rivals like Amazon.com (AMZN), Alphabet (GOOGL), and Microsoft (MSFT).

Regionally, revenues from the Americas grew by 8.8% year-over-year to $9 billion, accounting for 63.7% of total revenues. The Europe/Middle East/Africa region reported a 3.2% increase to $3.42 billion, representing 24.2% of total revenues. Revenues from Asia Pacific rose 0.9% to $1.7 billion.

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Top-Line Details

Cloud services and license support revenues ascended by 10% year-over-year and 12% in cc, reaching $11 billion, driven mainly by OCI, strategic cloud applications, and database services. However, cloud licenses and on-premise licenses dropped 10% year-over-year (down 8% at cc) to $1.12 billion.

Total cloud revenues (including SaaS and IaaS) were up 23% in both USD and 25% in cc at $6.2 billion. Revenues from Cloud Infrastructure (IaaS) reached $2.7 billion, marking a 49% year-over-year growth and 51% at cc. Additionally, Cloud Application (SaaS) revenues totaled $3.6 billion, representing a 9% year-over-year increase (10% at cc).

Fusion Cloud ERP (SaaS) revenues stood at $0.9 billion, climbing 16% year-over-year (18% at cc). Similarly, NetSuite Cloud ERP (SaaS) revenues also reached $0.9 billion, up 16% year-over-year and 17% at cc.

Hardware revenues were reported at $703 million, down 7% year-over-year (down 5% at cc). Services revenues slightly decreased by 1% (up 1% at cc) to $1.29 billion.

Oracle currently operates in 18 cloud regions with database-at-cloud services and has plans for an additional 40 regions in partnership with Azure, Google, and AWS. The company reported that database subscription services, including license support, grew by 6%. Application subscription revenues reached $4.8 billion, also up by 6% year-over-year.

Additionally, Oracle’s strategic back-office SaaS applications have annualized revenues of $8.6 billion, an 8% increase. The software license revenue fell by 8% to $1.1 billion.

Infrastructure subscription revenues, which include license support, saw an 18% growth to $6.2 billion. The heightened demand for AI has significantly bolstered Oracle Cloud Infrastructure revenues, which surged by 51%. Excluding legacy infrastructure, cloud services revenues increased by 54%, and annualized revenues for infrastructure cloud services now stand at $10.6 billion.

OCI consumption revenues rose by 57% amid overwhelming demand. Notably, GPU consumption revenues are now nearly 3.5 times higher than last year. Cloud database services also reported a 28% increase, with annualized revenues reaching $2.3 billion. Autonomous Database consumption revenues grew by 42% on top of the 32% growth recorded the previous year.

Operating Details of Oracle

The non-GAAP total operating expenses increased by 6% year-over-year and 8% in cc to $7.93 billion.

The non-GAAP operating income amounted to $6.19 billion, reflecting a 7% year-over-year increase and 9% at cc, with the non-GAAP operating margin at 44%, expanding by 23 basis points on a year-over-year basis.

ORCL’s Balance Sheet & Cash Flow

As of February 28, 2023, Oracle’s cash & cash equivalents and marketable securities totaled $17.8 billion, up from $11.3 billion as of November 30, 2024.

Operating cash flow and free cash flow were reported at $20.7 billion and $5.81 billion, respectively.

Oracle’s remaining performance obligation (RPO) is over $130 billion, signifying a 63% growth in constant currency. This trend reflects an increasing customer preference for larger and longer contracts, demonstrating the real-world benefits they experience from Oracle Cloud Services.

Moreover, cloud RPO increased by more than 90% and now constitutes over 80% of total RPO. Approximately 31% of total RPO is expected to convert to revenue within the next 12 months.

The company repurchased 1 million shares for a total expenditure of $150 million. Furthermore, Oracle’s board of directors declared a quarterly cash dividend of 50 cents per share, up 25% from the former dividend of 40 cents. This dividend will be accrued to shareholders of record as of April 10, 2025, and will be payable on April 23, 2025.

Key Q3 Takeaways

Oracle is building a large 64,000 GPU, liquid-cooled NVIDIA GB 200 cluster for AI training. In the last three months, the company reported a remarkable 200% growth in its multi-cloud service across Amazon, Google, and Microsoft platforms.

During the third quarter, Oracle secured a multi-billion-dollar contract with AMD for 30,000 of their latest MI355x GPUs. Additionally, four leading cloud security firms—CrowdStrike, Cyber Reason, Newfold Digital, and Palo Alto—transitioned to Oracle Cloud this quarter.

Oracle has also signed cloud agreements with several prominent technology companies, including OpenAI, enhancing its position in the cloud computing landscape.

Oracle Forecasts Growth Driven by Strong Sales Backlog

Oracle Corporation (ORCL) anticipates significant revenue growth as it moves into fiscal 2026, starting June 2025. The company projects a 15% overall revenue increase, primarily supported by a substantial sales backlog of $130 billion.

Fiscal 2025 Guidance

Looking ahead to the third quarter of fiscal 2025, Oracle expects total revenues to climb between 9% and 11% in constant currency, translating to an 8% to 10% increase based on current USD exchange rates. Notably, cloud revenues are projected to rise between 24% and 28% at constant currency rates, and 25% to 27% when measured in USD.

In addition, Oracle forecasts its non-GAAP earnings per share (EPS) to grow between 0% and 2%. This translates to an expected EPS of $1.62 to $1.66 in constant currency and approximately $1.61 to $1.65 in USD.

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