Oracle expands buyback plan, increases dividend 33% as profits come in strongly

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Oracle

shares are declining, although the business software company reported better-than-expected financial results, while also announcing an expanded share buyback program and a 33% dividend increase.

Revenue for the fiscal third quarter, which ended February 28, was $ 10.09 billion, up 3% from a year earlier, in line with the company’s forecast of 2% to 4% growth, and slightly higher than the Street consensus of $ 10.07 billion. Adjusted earnings were $ 1.16 per share, up 20%, and ahead of the company’s earnings forecast of $ 1.09 to $ 1.13 per share.

Under generally accepted accounting principles, operating income was $ 3.9 billion, an increase of 10%. Non-GAAP or adjusted operating income was $ 4.8 billion, also up 10%. GAAP net income was $ 5 billion, or $ 1.68 per share, including a $ 2.3 billion tax benefit from the transfer of certain assets between subsidiaries.

Oracle also announced an expansion of its share buyback program by $ 20 billion and increased the quarterly dividend rate from 24 cents to 32 cents. The move gives the stock a return of approximately 1.8%.

Oracle said it continues to see strong revenue growth in cloud-based applications, with Fusion ERP (financial software for large companies) at 30% and NetSuite ERP (for smaller companies) at 24%. Total revenue from subscriptions has increased by 5%. Oracle sales subscription revenue now accounts for 72% of total revenue.

The company also said it saw more than 100% growth again in its Oracle Cloud Infrastructure business, which competes with public cloud leaders

Amazon.com

(AMZN),

Microsoft

(MSFT) and alphabet (GOOG).

“We are opening new regions as soon as possible to support our high-growth multi-billion dollar infrastructure operations,” Oracle Chairman and Founder Larry Ellison said in a statement. “In terms of applications, analysts continue to call Oracle the clear number one in cloud ERP.” He said Oracle has signed contracts totaling hundreds of millions of dollars to move even more large companies from SAP ERP to Oracle Fusion.

The company said revenues from “cloud service and licensing support” were up 5% this quarter to $ 7.25 billion, while revenues from “cloud and on-premise licensing,” the company’s traditional operations, were up $ 1.28 billion, an increase of 4%. Hardware industry revenue was $ 820 million, down 4%, while services were $ 737 million, down 5%.

Speaking with investors Wednesday afternoon, CEO Safra Catz said the company expects quarterly earnings to rise between 5% and 7% in May, or between 1% and 3% in constant currency.

She said Oracle expects non-GAAP earnings for the quarter to be $ 1.28 to $ 1.32 per share, or between $ 1.20 and $ 1.24 per share in constant currency. Wall Street consensus was at $ 1.20 per share. Catz said the company expects to spend aggressively in the quarter to expand its Oracle Cloud capacity in preparation for expected strong demand in fiscal 2022.

At a notable point during the call, Ellison read a list of over 100 companies that he says have shifted some or all of their financial applications business from SAP’s ERP software to Oracle’s Fusion ERP, including

First Solar

Cemex,

Western Digital

and many others.

During late trading, Oracle shares fell 6% to $ 67.80. The stock has outperformed the market in recent weeks. Even with Wednesday afternoon’s weakness, the stock is up about 10% since a recent rise Barron’s editorial about the company.

Write to Eric J. Savitz at [email protected]