Cloud computing: Oracle forecasts profit below Wall Street estimates

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Cloud computing: Oracle
Cloud computing: Oracle forecasts profit below Wall Street estimates

As the company benefits from the pandemic with businesses opting for hybrid-work models, it plans to double its capital spending on the cloud computing segment to nearly $4 billion in fiscal 2022

On Tuesday, Oracle Corp forecasted Profits of current-quarter below Wall Street estimates, as the business software maker ramps up investments in its cloud computing business to take on rivals including Microsoft and Amazon.com.

As the company benefits from the pandemic with businesses opting for hybrid-work models, it plans to double its capital spending on the cloud computing segment to nearly $4 billion in fiscal 2022.

Increased investment in cloud computing, however, led Oracle to forecast first-quarter earnings per share of 94 cents to 98 cents, below expectations of $1.03, sending its shares down 4.5 per cent in extended trading.

The company has been setting up more data centres to assist businesses as they expand operations, helping it beef up cloud offerings and win high-profile customers such as Zoom Video Communications.

When compared to giants such as Alphabet Inc.’s Google, Microsoft and Amazon, investors and analysts though still see the 45-year-old company as a niche player.

“The company still has a lot of work to do and progress to make before they are considered in the same category as the leading cloud infrastructure companies”, said Scott Kressler, analyst at Third Bridge.

“One of Oracle’s biggest issues is how small the company’s revenue growth has been, despite a focus on its cloud solutions”.

Oracle said it expects current-quarter revenue at its largest unit, cloud computing services and license support, to grow by 4 per cent, which comes to about $7.2 billion, according to Reuters’ calculations. Analysts on average expect it to be $7.36 billion.

Compared with estimates of a profit of $1.31 and revenue of $11.04 billion, the company posted an adjusted profit of $1.54 per share on revenue of $11.23 billion in the fourth quarter ended May 31.

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