What’s Going On Here?Oracle probably saw this one coming: after laying out a foreboding quarterly update for investors, the world’s second-biggest software company’s stock initially fell 5% on Wednesday. What Does This Mean?Seeing as Oracle’s last quarter ended in May, its results showed the full coronavirus-stained picture. The company fell victim to delayed payments as businesses tried to save themselves money, maybe because they thought Oracle – with its $37 billion bank balance – didn’t need it as much as they did. Throw in nervous customers that might’ve paid for Oracle’s services in better circumstances, and it’s little surprise the company’s revenue and profit came in lower than expected.
And given we’re stuck with those circumstances for a while, Oracle isn’t forecasting its sales will grow at all this quarter versus the same time last year. That’s a far cry from the growth software giants like Amazon’s AWS and Microsoft are expected to turn in – even if it is what Oracle’s investors predicted. Why Should I Care?The bigger picture: Zoom this, Zoom that.
With so many people forced to work from home, cloud-based software companies like Zoom have benefited from an increase in demand. But not everyone's a Zoom: “enterprise software” – which includes Oracle’s specialties of employee management, databases, and resource planning – is expected to take a hit as companies reprioritize their spending. Near term, then, Oracle’s opportunity lies in converting its big software customers into cloud-based software customers, just like Adobe and Salesforce have done.
Zooming out: Fool me once...
Next month, we’ll start to hear how most companies have done in the second quarter. Analysts are setting expectations low: they think major US companies’ earnings will be 44% lower than the same time last year. But even that could be generous. Only 48 of those companies have given second-quarter earnings guidance, and almost four times as many have washed their hands of their own previous forecasts. That suggests investors could be in for some big surprises… | 