Oracle's first-quarter results have provided a reality check for the resurgent tech sector, as the software maker's sales came in below analysts' estimates.
The database giant, which posted its results after market close Wednesday, was in line with analysts' profit forecast, but its revenue felt the effects of weak demand, especially overseas. Oracle's shares dipped 79 cents, or 3.57%, to $21.34 in pre-market trading Thursday as investors digested the revenue miss.
Oracle's license revenue, in particular, took a hit, according to Safra Catz, the company's president.
"We had slower than usual growth in database middleware license revenue in Europe and APAC," she said, during a conference call late Wednesday. This was largely thanks to a tough year-over-year comparison and the fact that software resellers such as SAP are selling fewer databases, she added. To illustrate this point, Catz explained that SAP's applications business is down 40%.
Oracle's results were also impacted by foreign currency, which reduced its GAAP earnings by 2 cents a share.
The company, however, is still seen as a good bet by analysts, who point to its strong gross margins and solid second-quarter guidance.
"We remain a 'Buy' despite weaker first-quarter license [revenue]," wrote Ross MacMillan, an analyst at Jefferies & Company, in a note released Thursday. The analyst pointed to Oracle's non-GAAP gross margin of 80%, which came in above Jefferies' estimate of 78%, as evidence of the company's health.
Excluding items, Oracle expects second-quarter earnings between 35 cents a share and 36 cents a share, up from 34 cents in the same period last year. Analysts surveyed by Thomson Reuters had predicted second-quarter earnings of 36 cents a share.