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Trends & Analysis
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News

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News

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US big banks report better-than-expected earnings

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Oracle shares plunge despite earnings beat

Tuesday, December 12, 2023

Today’s headlines

What’s happening: Shares of Oracle Corporation fell in after-hours trading on Monday, following the release of the company’s second-quarter results.

What happened: The software maker reported better-than-expected earnings for its latest quarter.

However, Oracle reporting a slowdown in sales growth in one of its major businesses exerted pressure on the stock.

How were the results: The Austin, Texas-based company reported a single-digit increase in sales for the quarter ended November 30.

  • Revenues grew 5.4% year-over-year to $12.94 billion, felling short of the consensus estimates of $13.05 billion.
  • Adjusted earnings rose to $1.34 per share, from $1.21 per share in the year-ago quarter and came in higher than Wall Street expectations of $1.32 per share.

Why it matters: Elevated borrowing costs due to sticky inflation have forced companies to lower their overall spend, weighing on Oracle’s results.

The company is facing stiff competition from tech giants, including Amazon, Google-parent Alphabet and Microsoft. In October, Alphabet also recorded the slowest growth in its cloud business in around 11 quarters, which fuelled concerns around demand.

Although Oracle is looking to accelerate its AI infrastructure, with companies increasingly adopting GenAI, the market is dominated by Amazon and Microsoft.

Oracle’s cloud revenues grew 25% to $4.8 billion in the latest quarter, following 30% growth in the prior quarter. This was the second straight quarter of decelerating growth in cloud revenues.

Despite this slowdown, CEO Safra Catz said during the earning call that demand for cloud infrastructure and GenAI was growing “at an astronomical rate.” She added, “As a measure of that demand, Oracle’s total Remaining Performance Obligations (RPO) climbed to over $65 billion – exceeding annual revenue. Our cloud businesses are now at nearly a $20 billion-dollar annual revenue run rate, and cloud services demand continues to grow at unprecedented levels.”

Revenues of Fusion software for managing corporate finance rose 21% last quarter. Oracle’s operating cash flows came in at $17 billion, while free cash flows stood at $10.1 billion.

Management guided to overall revenue growth of 6% to 8% for the current quarter, in-line with market expectations for 7.6% growth.

How shares responded: Oracle’s shares fell 8.8% to $104.97 in extended trading hours on Monday, following the release of quarterly results. The stock has gained around 38% year to date.

What to watch: Investors will continue watching inflation and interest rates, which are expected to significantly impact demand for the company’s offerings. Rising competition in cloud business will also remain in focus.

The markets today

The British pound will be in focus today ahead of a basket of economic reports

Context: The GBP/USD forex pair edged higher on Monday, after remaining volatile for most of the session.

Details: Investors eagerly await a busy week of economic data releases and minutes from the Bank of England’s meeting.

The British central bank is scheduled to meet on Thursday to announce its final policy decision for 2023. Traders widely expect the BoE to keep its interest rate unchanged at a 15-year high of 5.25%. Markets also expect the BoE to reduce interest rates at a slower pace than the US Federal Reserve.

Strength in the greenback limited the overall gains for the GBP/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose around 0.1% to 104.10 on Monday.

The GBP/USD forex pair gained around 0.1% to reach 1.2557, after swinging between gains and losses through the session. Meanwhile, London’s FTSE 100 fell 0.13% to close at 7,544.89, underperforming its European peers, with industrial miners leading the losses.

What to watch: Investors await the release of economic reports on unemployment rate, average weekly earnings, employment change and claimant count change from the UK today. The unemployment rate, which stood at 4.2% in the three months leading up to September, is expected to increase to 4.3% in October.

Average weekly earnings, including bonuses, had risen by 7.9% year-over-year to £673/week in the three months to September. This is expected to increase by 7.7% in October. The number of people claiming jobless benefits in the UK, which increased by 17,800 thousand in October, is projected to rise by 15,000 in November.

Other Markets: US trading indices closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.43%, 0.39% and 0.85%, respectively.

The news shaping the markets

Russia is reportedly planning to hold Presidential elections in four annexed Ukrainian regions – Donetsk, Luhansk, Zaporizhzhia and Kherson. The news sent the RUB/USD forex pair higher this morning.


Australia’s Westpac-Melbourne Institute consumer sentiment index increased to 82.1 in December, from 79.9 in the previous month, lending support to the AUD/USD forex pair.


Japan’s producer prices rose 0.3% year-over-year in November, following a 0.9% rise in the prior month, which sent the JPY/USD pair higher in forex trading this morning.


New Zealand’s visitor arrivals jumped by 39.8% year-over-year to 225,979 in October, lending support to the NZD/USD forex pair.


US consumer inflation expectations for the year ahead eased to 3.4% in November, from 3.6% in the earlier month, sending the Dow Jones index higher by more than 150 points on Monday.

What else to watch today

South Africa’s mining production and manufacturing production, Eurozone’s ZEW economic sentiment index, Germany’s ZEW economic sentiment index and ZEW indicator of current conditions, US NFIB small business optimism index, consumer prices, Redbook index and government budget, Brazil’s consumer price index and industrial entrepreneur confidence index, India’s industrial production, retail price inflation and manufacturing production, Mexico’s industrial production, as well as Russia’s balance of trade.


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