2QFY5/24 results in line, 3QFY5/24 revenue guidance slightly below
- Revenue increased by 5% y-o-y in 2QFY5/24, with cloud revenue increasing by 25%
- Non-GAAP earnings per share increased 11% y-o-y to US$1.34, in line with market expectations
- Revenue is expected to grow by 6-8% y-o-y in 3QFY5/24, slightly below market expectations, due to slower-than-expected IaaS growth
Revenue increased by 5%, driven by robust growth of cloud businesses. The company’s cloud revenue (IaaS plus SaaS) rose by 25% y-o-y to US$4.8bn during the reported period. Cloud infrastructure (IaaS) revenue climbed 52% y-o-y to US$1.6bn, demonstrating robust growth compared to other hyperscale cloud players, but slightly slower than the 66% y-o-y growth recorded in the prior quarter. The company’s signature products, Fusion and NetSuite ERP Cloud, continued to perform strongly, with both rising by 21% y-o-y. On-premise license revenues decreased by 18% y-o-y, in line with the company’s on-going cloud transformation strategy. Non-GAAP earnings per share increased 11% y-o-y to US$1.34, in line with market expectations.
Expect negative share price reaction in short term, with weaker-than-expected 3QFY5/24 revenue guidance. Management projects revenue to grow by 6-8% y-o-y in 3QFY5/24, slightly below market expectations of c.8% y-o-y growth, largely due to slower-than-expected cloud infrastructure revenue growth. While cloud infrastructure revenue growth has slowed down for 2 consecutive quarters, management mentioned that this segment will grow by more than 50% in the coming quarters, surpassing the growth of other hyperscale cloud players. We maintain a positive view on the company’s outlook, as we expect it to continue gaining market share in its cloud business, particularly with its specialisation in serving AI-related demand.