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(Reuters) – Oracle Corp (NYSE:ORCL) forecast fourth-quarter profit above Wall Street estimates as the legacy software firm expects its heavy cloud investments to pay off, as more businesses ramp up their spending to support hybrid work and transition to cloud.
The company’s strong forecast, which was disclosed on a call with analysts, pulled up its shares from a nearly 6% slide in extended trading triggered by tepid third-quarter profit due to higher spending for its cloud services.
Oracle said it is on track to spend $4 billion in capital expenditure this year as it looks to build more data centers and improve its cloud services that trail behemoths like Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOGL)’s Google.
Edward Jones analyst Logan Purk said Oracle’s plan to increase investment in its cloud business was the “right move.” “I do think that’s (profit forecast) enough to convince investors Oracle still has room to grow,” he said.
Oracle said its third-quarter operating expenses were up as the company invested aggressively to meet customer demand for cloud services. Cloud services and license support costs alone rose 23% during the quarter, while total operating expenses were up 8% at $6.69 billion.
Excluding items, it earned $1.13 per share for the quarter ended Feb. 28, missing analysts’ estimates of $1.18.
Oracle Chief Executive Officer Safra Catz said earnings were hit by “share price declines of equity investments, impacted by the widespread downturn in equity markets last quarter.”
Revenue was at $10.51 billion, in line with estimates, according to IBES data from Refinitiv.
The company expects fourth-quarter adjusted profit to be between $1.40 and $1.44 per share, ahead of estimates of $1.38. It forecast revenue to grow between 6% to 8% on a constant currency basis.
