Oracle Q4 Earnings Preview: Are Customers Renewing Cloud Subscriptions?

Oracle Corporation ORCL is scheduled to report its FYQ4 results on June 16.

Barclays’ Raimo Lenschow maintains an Overweight rating on the company, with a price target of $48.

Q4 Preview

“Q4 is Oracle's biggest revenue quarter, since it is also the largest license quarter. We believe investors are fairly nervous about the magnitude of the license declines, which we expect to more than offset the cloud gains the quarter; this could lead to volatility around earnings,” Lenschow mentioned.

The analyst pointed out, however, that Barclays’ VAR survey was slightly negative for the quarter, with most resellers missing their targets in Q4, as compared to Q3.

On-premise license sales also appear to have been weaker than in Q3, with resellers seeing increased discounting, compared to the norm.

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SaaS/PaaS And Cloud

“Oracle might begin to see an FX benefit, both in this quarter as well as for next year,” Lenschow believes, and stated that “SaaS/PaaS billings have the potential to be quite strong this quarter.”

The analyst also expects the full year guidance for cloud to be boosted by the Opower and Textura acquisitions, which could add almost $300 million in revenue.

“We view Oracle as attractive relative to large-cap peers and view its robust capital return program and continued strong free cash flow generation as compelling,” Lenschow added.