Oracle expands the repurchase plan and increases the dividend by 33% as earnings increase

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Oracle

shares are falling even though the business software company reported better-than-expected financial results, while announcing an expanded stock repurchase program and a 33% dividend increase.

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

According to generally accepted accounting principles, operating income amounted to $ 3.9 billion, up 10%. Non-GAAP or adjusted operating income amounted to $ 4.8 billion, up 10%. GAAP’s net income was $ 5 billion, or $ 1.68 per share, including a $ 2.3 billion tax benefit on the transfer of certain assets between subsidiaries.

Oracle also announced a $ 20 billion expansion of its share repurchase program and raised the quarterly dividend rate to 32 cents, from 24 cents. The move gives the stock an approximate return of 1.8%.

Oracle said it continues to experience strong sales growth in cloud-based applications, with Fusion ERP (financial software for large companies) 30% and NetSuite ERP (for smaller companies) 24%. Subscription revenue overall increased 5%. Oracle’s subscription revenue from sales now accounts for 72% of global revenue.

The company also said it was again experiencing 100% growth in its Oracle Cloud Infrastructure business, which competes with public cloud leaders.

Amazon.com

(AMZN),

Microsoft

(MSFT) and Alphabet (GOOG).

“We are opening up new regions as quickly as we can to support our fast-growing $ 1 billion infrastructure business,” Oracle President and Founder Larry Ellison said in a statement. “In terms of applications, analysts continue to rank Oracle as the number one clear ERP in the cloud.” He said Oracle signed contracts totaling hundreds of millions of dollars to move several larger companies from SAP ERP to Oracle Fusion.

The company said revenue from “cloud licensing and service support” increased 5% in the quarter to $ 7.25 million, while revenue from “cloud licensing and local licensing,” the traditional business of the company, were $ 1.288 billion, up 4%. Hardware business revenue totaled $ 820 million, down 4%, while services reached $ 737 million, down 5%.

In a call with investors on Wednesday afternoon, CEO Safra Catz said the company expects May quarter revenue to grow by 5% to 7%, or by 1% to 3% in constant currency .

He said Oracle expects non-GAAP earnings during the quarter of between $ 1.28 and $ 1.32 per share, or between $ 1.20 and $ 1.24 per share in constant currency. The Wall Street consensus had been $ 1.20 per share. Catz said the company expects to invest aggressively in the quarter to expand its Oracle Cloud capacity in preparation for strong demand forecast for fiscal year 2022.

At one notable point, Ellison called the call a list of more than 100 companies that said they have changed some or all of their financial application business from SAP ERP software to Oracle Fusion ERP, including

Primer Solar,

Cemex,

Western Digital,

and many others.

At the end of trading, Oracle shares fell 6% to $ 67.80. The shares have significantly outperformed the market in recent weeks. Even with the weakness on Wednesday afternoon, shares have risen about 10% since the recent De Barron cover story about the company.

Write to Eric J. Savitz at [email protected]