Earnings Results: Oracle stock boomerangs after forecast and a knowing laugh about TikTok

United States

After Oracle Corp. Chief Executive Safra Catz offered an in-line forecast and Chairman Larry Ellison knowingly laughed when asked about storing TikTok’s data in the U.S. on Thursday afternoon, the software company’s shares rebounded from a steep after-hours post-earnings decline.

Oracle  ORCL, +0.72% shares, which had dropped as much as 8% after hours, recovered and were flat in the extended session following a conference call in which Catz and Ellison were asked about a reported data deal with TikTok owner Bytedance. After Ellison chuckled, Catz told analysts, “the one thing I can tell you is, we have an excellent relationship with the folks at TikTok.”

“I’ll second that,” Ellison said. “It’s excellent.” Neither executive confirmed the deal.

Shares initially dropped after Oracle reported that fiscal third-quarter profit fell, which it blamed on investments including Ampere and Oxford Nanopore Technologies PLC ONT, -1.76% not providing the boost that its 2021 holdings provided. Shares began to rebound after Catz gave a fiscal fourth-quarter forecast that hit analysts’ marks, while projecting another year-over-year earnings decline due to a combination of low taxes and investment gains a year ago.

“Both non-GAAP and GAAP EPS are expected to decline year-over-year due to some large investment gains we saw last year, as well as a very low tax rate last year,” Catz said on the call, noting an increase in Oracle’s tax rate to 18.4% from 10.7%.

Catz forecast fourth-quarter earnings of $ 1.35 to $ 1.39 a share on revenue growth of 3% to 5%, or $ 11.56 billion to $ 11.79 billion, despite not including any revenue from the company’s $ 28.3 billion deal to acquire Cerner Corp. CERN, -0.11%, which hasn’t closed. Analysts surveyed by FactSet were forecasting $ 1.38 a share on revenue of $ 11.75 billion.

Reuters reported Thursday morning that Oracle was near a deal with TikTok to store information of U.S. users without the video-sharing app’s Chinese parent company ByteDance having access to it. In 2020, Oracle stood to acquire TikTok in a complicated deal with Walmart Inc. WMT, +2.27% at the behest of then-President Donald Trump, but that deal was shelved and the Biden administration dropped Trump-era executive orders to ban the app.

For the fiscal third quarter, Oracle reported net income of $ 2.32 billion, or 84 cents a share, compared with $ 5.02 billion, or $ 1.68 a share, a year ago. Adjusted earnings, which exclude stock-based compensation expenses and other items, were $ 1.13 a share, compared with $ 1.16 a share in the year-ago period. Revenue rose to $ 10.51 billion from $ 10.09 billion in the year-ago quarter.

Analysts had estimated earnings of $ 1.18 a share — based on Oracle’s forecast of $ 1.14 to $ 1.18 a share — and revenue of $ 10.51 billion.

The stock moves followed a 0.7% rise in the regular session to close at $ 76.65. Oracle shares are up 6% over the past 12 months, versus a 5% decline by the iShares Expanded Tech-Software Sector ETF IGV, -1.52%, while the S&P 500 index SPX, -0.43% has gained 9% and the tech-heavy Nasdaq Composite Index COMP, -0.95% is virtually flat.