Oracle’s Stock Price Declined As The Company’s Revenue Growth Fell Short Of Expectations

Oracle’s stock fell over 8% after the company reported lower-than-expected earnings and guidance.

For the fiscal first quarter that ended on August 31, Oracle reported a revenue of $12.45 billion which was almost in line with what analysts had predicted. The revenue increased by 9% from the previous year, and when adjusted for currency it rose by 8%. The company had earlier predicted that the quarter would experience a growth of 8% to 10% in constant currency. Adjusted profits were $1.19 a share, which is four cents higher than the Wall Street consensus of $1.15 a share and also above the guidance range of $1.12 to $1.16 a share. Oracle earned 86 cents a share in the quarter, according to the generally accepted accounting principles.

Oracle’s cloud revenue was $4.6 billion, up 30% from a year ago. This includes a 17% growth in cloud application revenue to $3.1 billion and a 66% growth in cloud infrastructure revenue to $1.5 billion.

The company stated that Fusion Cloud ERP, its enterprise software for larger enterprises, was up 21% to $800 million, while NetSuite Cloud ERP, similar software for smaller companies, was up 21% to $700 million.

Oracle Chairman and CTO Larry Ellison said in the earnings statement that “Self-driving cars, molecular drug design, voice user interfaces—billions of dollars are being invested in AI. As of today, AI development companies have signed contracts to purchase more than $4 billion of capacity in Oracle’s Gen2 Cloud. That’s twice as much as we had booked at the end of Q4.”

Ellison also claimed that Oracle can train AI models at twice the speed and less than half the cost of other clouds.

Oracle’s stock has rallied more than 50% this year, driven by growing expectations that its Oracle Cloud Infrastructure business will get a boost from generative AI workloads.

For the November quarter, Oracle expects revenue to increase by 5% to 7%, or 3% to 5% in constant currency. Excluding the company’s recently acquired Cerner healthcare software business, Oracle expects growth of 8% to 10%, or 6% to 8% adjusted for currency.

Total cloud revenue, excluding Cerner, is expected to grow by 29% to 31%, or 27% to 29% in constant currency. Oracle expects profits for the quarter to be between $1.30 and $1.34 a share. Analysts had predicted revenue of $13.3 billion, up 8%, with profits on an adjusted basis of $1.34 a share.

Oracle CEO Safra Catz said the company remains committed to its previous FY 2026 financial target of at least $65 billion in revenue. Catz also said that her early read on Oracle’s May 2024 fiscal year was for unprecedented cloud demand, with growth on par or better than fiscal 2023.

Oracle continues to move its legacy customers to cloud-based versions of its flagship database software and its suite of enterprise applications, including NetSuite and Fusion.

The company’s story is driven by the Oracle Cloud, known as OCI, and the outlook for the company’s role in AI. Among other things, it has benefited from a strong relationship with Nvidia, which has given Oracle a generous allocation of GPU chips that it uses to offer AI computing services to customers.

Oracle will hold a meeting with analysts next week in connection with its annual Oracle Cloud World user conference. Additionally, the company has announced a joint press conference with Microsoft this Thursday, which will feature both Ellison and Microsoft CEO Satya Nadella, and will focus on their work together on cloud computing applications.

Oracle Short (Sell)
Enter At: 124.74
T.P_1: 121.44
T.P_2: 117.61
T.P_3: 113.33
T.P_4: 110.21
T.P_5: 106.53
S.L: 132.26


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