Database systems veteran Oracle (NYSE:ORCL) reported results Monday evening, covering the first quarter of fiscal year 2019. Oracle's bottom-line earnings exceeded analyst estimates, but the company fell short of investor expectations elsewhere, and the stock fell as much as 3.7% lower on Tuesday morning.

Oracle's second quarter by the numbers

Metric

Q1 2019

Q1 2018

Change (YOY)

Revenue

$9.19 billion

$9.10 billion

2%

Net income

$2.27 billion

$2.14 million

8%

Adjusted earnings per diluted share

$0.71

$0.61

19%

Data source: Oracle. YOY = year over year.

Your average Wall Street analyst had been looking for adjusted earnings of roughly $0.69 per share on roughly $9.3 billion in top-line revenues. The analyst view had been targeted at the top end of Oracle's official guidance range, while the Street's revenue targets hewed closer to the midpoint of Oracle's projected range.

Normally, changes in a company's earnings per share tend to track close to their net income figures. In this case, Oracle boosted its EPS figures through a generous share buyback program, repurchasing 8.5% of its total share count over the last four quarters. Nearly half of these 440 million retired shares were acquired in the first quarter, consuming a net $9.7 billion of Oracle's free cash flows.

Guidance targets

Looking ahead, Oracle co-CEO Safra Katz painted a brighter picture for the second half of this fiscal year. Second-quarter sales should show roughly 1% year-over-year growth in constant currencies due to a bumper crop of license revenue in the year-ago period. Once Oracle gets over that hump, revenue growth should pick up the pace again in the third and fourth quarters. Analysts had been targeting a 2% revenue jump in the second quarter.

On the bottom line, Katz sees adjusted earnings of approximately $0.78 per share in the second quarter. That's a penny below the current Street view.

What management says

In a conference call with analysts, Oracle's leadership team expressed strong confidence in the company's competitive position.

"We think we have a very, very large lead in technology," said founder and chairman Larry Ellison, before admitting that competitors exist. "There might be a reason why you decide to use a database that's not as good."

In particular, Ellison shrugged off Amazon.com (NASDAQ:AMZN) and its database solutions for the AWS cloud-computing platform. The e-tailer runs its own infrastructure on Oracle's databases, and the Oracle Autonomous Database platform reportedly runs circles around other databases in terms of performance. Furthermore, that system can install security updates while running, something Ellison claims to be a unique feature.

"We think these compelling advantages will allow us to compete very effectively against Amazon in the infrastructure business," Ellison said, continuing:

Today, we may be behind Amazon in infrastructure market share, but we are way ahead of Amazon in cloud infrastructure technology. We think that will allow us to gain market share in infrastructure in the cloud very, very rapidly.

Businessman in deep thought at his desk.

Image source: Getty Images.

Why I'm not buying that story

It's good to see management hailing their company's bright prospects, but real-world data might tell a different story.

For example, Oracle's platform-as-a-service and infrastructure-as-a-service sales showed year-over-year sales growth of more than 20%. At the same time, Amazon's comparable AWS sales jumped 49% higher. Who's taking market share from whom?

As for the company's core competency in database sales, Oracle's modest single-digit growth rates stand far behind hungry upstarts like MongoDB (NASDAQ:MDB), whose order volumes are doubling annually.

Oracle talks a good game, but it can't quite support its rosy market view with actual results. The biggest value-building effort at the moment is found in that beefy buyback program. I find it hard to get excited about that idea, and so do many of Oracle's investors these days. The stock has been stuck in neutral over the last year and doesn't seem likely to break out of a tight trading range anytime soon.

It's probably best to stay on the sidelines of Oracle's stock until the company manages to outgrow the competition in some meaningful way. That's just not happening today.