Oracle (ORCL) reports quarterly earnings Thursday. Analysts expect revenue of $9.6 billion and EPS of $0.84. The revenue estimate implies flat growth sequentially.

Growth Appears Dead

Oracle provides services that address various aspects of a company’s information technology environment – application, platform, and infrastructure. Revenue from its cloud offerings had been growing at double digits, while On-Premise software had been growing in the low single digits. The company jump-started growth with its $9 billion acquisition of cloud services company NetSuite in late 2016.

For a while Oracle feasted off the NetSuite deal and upgrades and subscription fees for its legacy business. That may have come to an end last quarter after total revenue of $9.6 billion was flat Y/Y.

Cloud Services and License Support revenue was up 3%; every other operating segment experienced a revenue decline. This performance mirrored the result for the quarter-ended August 2018. Cloud Services and License Support represented about 69% of total revenue. The bulk of this revenue is recurring and provides Oracle a solid moat.

Oracle’s revenue may not fall off a cliff, but it likely will not grow either. Over 30% of its revenue is falling by low single digits. It is difficult to recommend a stock with flat to declining revenue growth. A dismal top line could hurt sentiment for ORCL long term.

What Levers Will Oracle Pull?

Despite dismal top line growth, management still has levers to pull. The company has nearly $6.5 billion of operating expenses it can cut into. Read more:


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