​Confidence in Oracle's Q2 wanes

Oracle reports its second quarter earnings on Wednesday and expectations are low given the company recent financial performance.

The database and applications company is expected to report earnings of 68 cents a share on revenue of $9.51 billion. The company has missed its revenue target five out of the last six quarters.

This quarter appears to have been hit by currency fluctuations, the timing of Thanksgiving, weak hardware sales (again) and a cloud strategy that is simply too busy, say analysts.

Patrick Walravens, an analyst at JMP Securities, said in a research report that only two of his checks ahead of the results were positive. Fourteen were negative. Meanwhile, Oracle's cloud business only represents about 6 percent of total revenue and the strategy is fuzzy. Oracle's approach has been to launch a non-stop barrage of services, but that move makes for a more complicated narrative.

Walravens said:

Our due diligence has uncovered 16 data points on the quarter - two of which are positive and 14 of which are negative. For the hardware/engineered systems business, we have zero positive and two negative data points. For the technology business (database and middleware), we have one positive and six negative data points. For the applications business (SaaS and on-premise), we also have one positive and six negative data points.

Wedbush analyst Steve Koenig wasn't exactly enthusiastic. He said:

Oracle's execution over the last nine quarters doesn't give us much confidence in the company's ability to meet consensus revenue expectations. Consensus doesn't look too difficult given the addition of MICROS - which we think is performing well - but Oracle has many pieces and secular challenges in its hardware and legacy applications businesses.

Koenig noted that the hardware business is likely to disappoint and there may be some cloud organic growth. Overall, Oracle is likely to cut its outlook for the third quarter simply based on currency.

Stifel analyst Brad Reback noted that Oracle could hit its quarter, but it's unlikely that the company can deliver meaningful gains relative to estimates because of the transition to the cloud. License growth will suffer, but the focus on the cloud is "a healthy long-term move."