Oracle stock rebounds following outlook, report of TikTok deal

Oracle Corp. shares recovered from a drop in the extended session Thursday after Wall Street estimates for the fourth quarter fell within the forecast range provided by the database-software company, and following a report that the company was near a deal with video-sharing app TikTok to hide U.S. user data.

Oracle 
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0.72%

shares, which had dropped as much as 8% after hours, recovered and were flat in the extended session following the conference call with analysts. The share moves followed a 0.7% rise in the regular session to close at $76.65.

On the call with analysts, Oracle Chief Executive Safra Catz said the forecast assumes that the company’s $28.3 billion deal to acquire Cerner Corp.
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does not close in the fourth quarter and that exchange rates do not change. The company expects a currency headwind of 2% to 3% on revenue .

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. Analysts surveyed by FactSet are forecasting $1.38 a share on revenue of $11.75 billion.

“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. “It was 10.7%. Both of these mask the strong earnings growth and momentum we continue to see out of our core cloud business.” Catz said the tax rate for the most recent results was 18.4%.

Also, Reuters reported 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. The app has faced renewed scrutiny from U.S. regulators, after the Biden administration dropped Trump-era executive orders to ban the app.

When asked on the call if the report was true, Oracle Chairman and Chief Technology Officer Larry Ellison laughed at first, and he and Catz provided a nebulous answer.

“The one thing I can tell you is we have an excellent relationship with the folks at TikTok,” Catz told analysts.

“I’ll second that,” Ellison said. “It’s excellent.”

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.

Oracle shares are up 6% over the past 12 months, versus a 5% decline by the iShares Expanded Tech-Software Sector ETF
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while the S&P 500 index
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has gained 9% and the tech-heavy Nasdaq Composite Index
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is virtually flat.