Johnson: "I Just Don't Get" why ORCL is Down After Earnings

Sam (0:00)

To break down ORCL's Latest Earnings Report, let's welcome in Cory Johnson, Chief Market Strategist at Epistrophe Capital Research. Happy Friday, Cory, what did you make of the report?

Cory Johnson (0:11)

So I wanna use this phrase right, so I'm glad it's the two of us here. I saw Christian McCaffrey, the 49ers running back, talking about an Australian barber gave him a haircut and said, it looks cracker.

And he was confused about this word. So Sam, are these results cracker? Can you translate some Aussie for us, your American audience?

Sam (0:32)

It is good, but you say the 49ers, because I thought you were going to refer to the Australian television presenter who's also been going viral for accidentally calling them the 69ers. So I'm glad we didn't go there, but you know, we could refer this to them as a cracker. Yeah.

Cory Johnson (0:51)

What does that mean?

Sam (0:53)

Great.

Cory Johnson (0:54)

Is it good? It's great?

Sam (0:55)

That was good. That was great.

Cory Johnson (0:57)

I felt the results were great, but the Wall Street hates this stock. It really is interesting. After I was trading, the stock was up about 7-8 percent. Yesterday, after the results came out, the stock was performing well in the first couple hours of trading this morning and really fell off.

I've been pouring over these results. Now, I'm long the stock. I'm not giving you investment advice here, but I just want you to know what my bias is here. I also like a lot of the people at Oracle, but these results were good, and they were good in the places that we might have had concerns. What will those places be? What is the growth like at Oracle and OCI at the Oracle Cloud Infrastructure, their data center business?

The way the data center business works is they build the data center for a customer, and then the customer moves their stuff into the data center, they start to get paid, which is to say, they put out billions, tens of maybe hundreds of billions of dollars when it's all said and done to build these data centers before they start getting paid. What do we see in these results? They are getting paid. The OCI revenues are up 121 percent in a year over year basis, even as they are still deeply engaged in the build out of these data centers. But I thought these results were a cracker. I thought these results were what we wanted to see from ORCL because customers are starting to pay them for the work that they are doing in building data centers. We also heard stories of customers who are engaging, not just in using their data centers, but also in all kinds of software, ERP database software, even ORCL services, although those revenues were down, I think 1 percent in a year over year basis. I thought it was a really strong quarter. Revenue growth increasing, not just revenues increasing, but the growth rates increasing, both at ORCL data centers and the overall company. I thought it was a fantastic quarter for ORCL. The market didn't seem to think that when the stock's down about 1 percent today, I just don't get it.

Sam (2:35)

Well, if ORCL were Australian, they would say to the markets and investors, they'd say, fair crack of the source bottle, which means, come on, fair go. Do you know what that means?

Cory Johnson (2:48)

I do now, as do all the rest of us. This is a great cultural moment we're having here. We got some California, we got some stock exchange, we got the Aussies.

Yes, you know I've got so much love for the Aussies. Having a daughter who lived there last year.

Look, I think what's going on is a translation issue, quite seriously. I think that ORCL's trying to tell its story to investors. And I think we're gonna get a lot more of that from ORCL's AI world, which takes place in October in Las Vegas. They're gonna have their analyst day towards the end of that, as they often do. They're a long time ahead of their analyst relations. Ken Bond announcing his retirement in the conference call yesterday, or at least people were talking with him during the conference call. He's let people know, but he's a really well-respected guy and liked a lot on Wall Street. I don't think that's having an effect on the share price necessarily, but ORCL's gonna tell its story, prove to investors, it is interesting that ORCL's become kind of the receptacle of AI doubt. That when other companies come out and announce big contracts, their stocks increase. When their stock prices increase, when other companies come out and talk about work that they're doing in the field of AI and working with the biggest players out there, their stocks seem to benefit from these things. But when ORCL comes out and announces that they've won contracts, lots of other companies are out there bidding for, the market seems to not like this. I think we could all agree that they've got enough OCI business from OpenAI, but we're seeing lots of other companies come in here and use their data centers and contract with ORCL to build these things.