Oracle Q3 Earnings: Cloud Infrastructure Growth in Focus
Oracle Q3 Earnings: Cloud Infrastructure Growth in Focus
- Oracle is scheduled to report third-quarter earnings on Tuesday, March 10.
- Analysts expect Oracle to report earnings per share of $1.70 on $16.92 billion in revenue.
- Options show an expected move of +/- 16.92 points.
Oracle reports third-quarter earnings on Tuesday, March 10, after the close.
The big focus for traders will be on Oracle’s cloud infrastructure, which is its fastest-growing business of renting out computing resources.
While Oracle’s cloud infrastructure, named Oracle Cloud Infrastructure (OCI), only commands a fraction of the market share held by its main competitors like Amazon’s Amazon Web Services, the company has aggressively expanded in recent quarters.
Oracle’s forward OCI growth can be attributed largely to deals with OpenAI and SoftBank, with those deals expected to start generating revenue in 2027. Last quarter, OCI growth was at 66% from the year prior, with its current customers—Nvidia, Meta, Cohere, etc.—offering significant growth.
Oracle has invested heavily in new capacity, but traders want to see that new capacity quickly translates into revenue. Oracle’s remaining performance obligations (RPOs) represent its backlog, which is contracted obligations from deals made even though they do not immediately add to revenue. That said, traders will want to see the RPO number increase.
Traders will have to assess whether Oracle has a good operational path to build additional capacity to serve these future obligations.
What do traders expect?
Oracle is expected to report earnings per share (EPS) of $1.70 on $16.92 billion in revenue. A year ago, EPS came in at $1.47 on $14.13 billion in revenue.
Last quarter, Oracle reported EPS of $2.26 on $16.06 billion in revenue. It has surprised to the upside in only two of the last four quarters on EPS, and in only one of the last four quarters on revenue.
Trading Oracle earnings
Oracle traded with an implied volatility rank (IVR) of 90.8 as of Monday, March 9. That means volatility is highly elevated compared to the past twelve months of trading.
The options market shows an expected move of +/- 16.29 points, which translates to a 10.8% move in either direction. That’s on the upper end of the average 5% to 10% earnings move for S&P 500 companies.
Oracle is down about 23% since the start of the year. Fears over so much of its future revenue coming from a single company, OpenAI, have weighed on sentiment, especially with CEO Sam Altman declaring a “code red” in which the company pauses some projects outside of its core focus of improving its models.
However, the drop into earnings could be seen as an opportunity to call a bottom in the stock. If the numbers are impressive, it could give traders an advantageous entry point to express a long view.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
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