Oracle Corp reported a quarterly profit that exceeded Street projections and a 14 percent climb in sales of new software, signaling the tech spending recovery is on track as businesses shell out on big-ticket items again.
Shares of the world's third largest software maker rose 4 percent.
Executives also reassured investors on Thursday that Europe's lingering economic woes will not derail the company's business in a region that accounts for a sizable chunk of its revenue.
Oracle President Safra Catz told investors on a conference call that business was very strong in Europe, where the company has a diverse group of customers across the region.
The issue that everybody is concerned about is that Europe is getting worse. And Oracle didn't acknowledge seeing any weakness in Europe, said Citi analyst Walter Pritchard.
Oracle, which competes with International Business Machines Corp , SAP and Hewlett-Packard Co , is benefiting as corporations loosen purse strings and begin spending on IT equipment and upgrades, making their businesses more efficient.
Our customers are making very, very significant investments, Catz said during the conference call.
Oracle posted profit, excluding items, of 60 cents per share, for its fiscal fourth quarter ended May 31, handily beating the average Wall Street forecast of 54 cents, according to Thomson Reuters I/B/E/S.
New software sales rose 14 percent from a year earlier to $3.1 billion. The company had forecast that sales of software would rise between 3 percent and 13 percent.
Investors focus on new software sales because they are a forward indicator of Oracle's profit. Customers generally sign maintenance contracts when they buy software, which locks in predictable, recurring revenue.
Laxmi Poruri, analyst with Primary Global Research, said that Oracle's strong performance bodes well for the rest of the industry.
Certainly in software, Oracle is a bellwether, he said.
Oracle's recently acquired Sun Microsystems hardware division -- a loss-making company before the takeover -- added more than $400 million to Oracle's operating profit, once one-time items were excluded.
Fourth-quarter revenue rose 39 percent to $9.5 billion. About $1.8 billion of that came from Oracle's new hardware business, which it set up after its January purchase of Sun Microsystems for $5.6 billion.
Catz said that she had increased confidence that Oracle will be able to meet its previously stated profit targets for Sun: contributing $1.5 billion to operating income, excluding items, in the current fiscal year, and $2 billion in the coming fiscal year.
Meanwhile, Oracle President Charles Phillips said that his company was taking large chunks of share away from key rival SAP AG in the market for business management software.
SAP spokesman Saswato Das said that Oracle's claim was erroneous and was not backed up by hard data comparing the sales of the two companies.
The company forecast that it would post a first-quarter profit, excluding items, of 35 cents to 37 cents per share, in line with the 36 cent average analyst forecast.
Fourth-quarter net income rose to $2.4 billion, or 46 cents per share, from $1.9 billion, or 38 cents, a year earlier.
Oracle shares rose to $23.15 in extended trade from their Nasdaq close of $22.22. The stock has declined about 16 percent since mid-April when it hit a nine-year high.
(Additional reporting by Alex Dobuzinskis; editing by Carol Bishopric)