The first fiscal quarter for the business software giant Oracle is usually an uncertain one. Historically speaking, its fourth quarter is always the strongest as sales teams close deals they’ve been working on for months.
But when it reports Q1 results after the markets close later today, the expectations are low, as the Morgan Stanley analyst Keith Weiss put in the headline of a research note published earlier this week, and therefore achievable. Analysts are calling for a per-share profit of 64 cents on sales of $8.8 billion, and for Oracle to issue guidance for a 74-cent profit on $9.7 billion in sales for the second quarter.
One problem Oracle is coping with is that it is shifting its revenue profile away from traditional software licenses, where the customer buys the software and pays up front, to a subscription-based model — essentially paying for what they use every month — that’s more typical of cloud-based companies like Salesforce.com and Workday. The latter creates a more predictable income stream, though Oracle is still selling a lot of the former, and the transition is still under way.
Oracle said in June that it’s on track to having a $2 billion business in software sold on a subscription basis. CEO Larry Ellison argued on a conference call that in the long run, Oracle will make more money on subscriptions because those arrangements can last as long as 20 years. But in the short term it has been making for some difficult quarter-to-quarter comparisons. Eventually the comparisons will smooth out.
Other things to watch for today: Hardware sales. The slow and arduous job of relaunching the old Sun Microsystems hardware business as Oracle’s new hardware business unit continues apace. The unit has grown for two consecutive quarters, so a third would make for an encouraging trend.
Finally, investors will be listening for hints about what Ellison will say at Oracle’s massive OpenWorld conference in San Francisco later this month. Ellison always likes to make a splash at that event, and this year will be no different.
This article originally appeared on Recode.net.