Oracle Stock Plunges After Revenue Miss, Slower Cloud Growth

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Key Takeaways

  • Oracle Corp. stock plunged Tuesday after the company reported fiscal second-quarter revenue and cloud growth that fell short of market expectations.
  • Earnings per share came in at $1.34, higher than analysts' expectations of $1.32, but market participants were disappointed with revenue of $12.94 billion and a slowdown in cloud growth to 25%.
  • Management's forward guidance also disappointed analysts, with some concerned about infrastructure spending.

Oracle Corp. (ORCL) shares plunged on Tuesday after the tech giant reported fiscal second-quarter earnings that missed on revenue and cloud growth expectations.

Adjusted earnings for the quarter rose 11% year-on-year to $1.34 a share, beating Wall Street forecasts of $1.32. Total revenue rose 5% over the same period to $12.94 billion, while cloud revenue climbed 25%. However, analysts were disappointed with the company's growth rates for those metrics, which slowed from 9% and 30%, respectively, in the fiscal first quarter.

Forward guidance from management put revenue growth at 6% to 8% for the current quarter, which was also close to consensus estimates of 7.6%.

Investors appear to have shrugged off bullish comments from the company's chief executive officer (CEO), Safra Catz, who said demand for cloud and generative artificial intelligence (AI) was "astronomical," citing Remaining Performance Obligations (RPO) of more than $65 billion, which exceed Oracle's annual revenue. The company's founder and chief technology officer, Larry Ellison, said demand was "over the moon," noting that the company is expanding 66 of its data centers and building 100 new ones.

That expansion brought concern about operating margins on the company's earnings call due to increased capital expenditures. Ellison suggested that the company can build the data centers more quickly and inexpensively than its competitors. Catz also commented on concerns that the company's Cerner acquisition was dragging on earnings, saying, "We expect Cerner to be a growth story" in the next fiscal year.

Oracle shares were down 12% at $100.80 at around 2:30 p.m. ET, but are still up more than 20% for the year.
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