With the Labor Day holiday in the rearview mirror, a wide variety of companies are gearing up to report their quarterly results in September. It will be a slow month for earnings compared to October, when many of the largest companies in the world will give an update to investors. But there are some major companies that will give investors data to chew on this month. Two in particular, Oracle (NYSE:ORCL) and Micron Technology (NASDAQ:MU), stand out as stocks to watch.
Database giant Oracle hasn't confirmed its earnings date yet, but the company is expected to release its fiscal first-quarter results on or around Sept. 14. Oracle finds itself in the same position as many of its fellow old guard technology companies. The rapid growth of cloud computing has made Oracle's core businesses vulnerable, and the company is now trying desperately to catch up.
Total revenue declined by 1% year over year during the fourth quarter, with shrinking legacy businesses more than offsetting growth in the cloud. Oracle's cloud business is still small, with cloud software and platform-as-a-service (PaaS) generating $690 million of revenue during the fourth quarter, and with cloud infrastructure-as-a-service (IaaS) generating just $169 million of revenue. To put that in perspective, Amazon Web Services, which is mostly an IaaS offering, is nearing a $10 billion annual run rate.
Total cloud revenue did increase by 49% year over year during the fourth quarter, but Oracle remains far behind. For the first quarter, Oracle does expect its cloud business to accelerate, guiding for 75% growth in software-as-a-service revenue and 80% growth in PaaS revenue. But continuing declines in its on-premise software business could continue to pressure the company's results.
Analysts are expecting Oracle to produce 3% year-over-year revenue growth during the first quarter, which would break a year-long streak of declines if the company matches estimates. If Oracle posts another revenue decline, especially if it's driven by weaker-than-expected cloud growth, the stock could tumble. In the long run, Oracle needs to transition to the cloud fast enough to protect its core businesses. Otherwise, the company will eventually face a crisis from which it may never recover.
Memory-chip maker Micron is expected to report its fiscal fourth-quarter results toward the end of September, although the company has yet to confirm the exact date. Micron shares have soared so far this year, up 18% year to date, driven by the expectation that improving DRAM and NAND pricing trends will begin to flow through to the company's results.
Micron reported a steep revenue decline and a loss during the third quarter, reflecting continued pressure on memory prices. The company's guidance calls for another loss during the fourth quarter, with non-GAAP EPS expected to be a loss between $0.16 and $0.24. But the company could beat this guidance if contract prices for its chips improved during the quarter. And analysts are expecting a return to profitability during the fiscal first quarter of 2017.
During Micron's third-quarter conference call, CEO Mark Durcan pointed out that while spot prices had begun to improve, the company wouldn't make assumptions about contract prices until it sees those improvements begin to play out. Micron's fourth-quarter guidance reflects this conservatism, leaving open the chance for a significant earnings beat. On the other hand, if contract prices failed to improve, Micron may end up guiding for another loss during the first quarter. That could quash investors' hope for a quick turnaround and lead to analysts slashing their estimates.
Micron is at the mercy of supply and demand when it comes to DRAM and NAND pricing, making it tricky to predict the timing of the company's recovery. With the stock at its highest level since late last year, investors are clearly betting on the situation improving sooner rather than later. Depending on Micron's fourth-quarter results, they may either get their wish or be sorely disappointed.