Oracle Stock Drops 8% After Missing Earnings Estimates and Issuing Weak Guidance
Oracle's shares tumbled nearly 8% in extended trading following a slight miss in quarterly earnings and lower-than-expected revenue guidance for the upcoming quarter.
Key Highlights:
Earnings and Revenue: Oracle reported fiscal Q2 revenue of $14.1 billion, up 9% year-on-year, with a profit of $4.21 billion, or $1.47 per share. However, the company expects revenue growth of 7% to 9% in the current quarter, projecting $14.3 billion, which falls short of analysts' estimates of $14.65 billion.
Cloud Business Growth: Oracle's cloud services, driven by high demand from AI companies like OpenAI, xAI, and Nvidia, grew 12% year-over-year and contributed 77% of the company's total revenue.
Stock Performance: Despite the recent decline, Oracle’s stock has surged 80% this year, pushing its market value from under $165 billion in late 2022 to over $500 billion.
AI Demand Fuels Oracle’s Growth
Oracle has benefited significantly from booming demand for computing power, particularly from AI companies training complex models. CEO Safra Catz emphasized on Monday's earnings call that Oracle’s cloud infrastructure is both faster and more cost-effective compared to competitors like Google, Amazon Web Services, and Microsoft. "We remain the preferred cloud for AI workloads," she stated.
Oracle also announced a partnership with Meta, where Meta will utilize Oracle’s AI cloud infrastructure to develop its Llama AI models.
Analyst Expectations and Market Reaction
The company’s failure to meet elevated market expectations weighed heavily on its stock, which has otherwise seen a meteoric rise in 2024. Monday’s decline reflects investor concerns over whether Oracle can sustain its impressive growth, particularly in its AI-driven cloud business.
While Oracle’s stock has been one of the year’s top performers, Monday’s drop underscores the challenges of meeting sky-high investor expectations in a competitive and fast-paced industry.
Oracle's shares tumbled nearly 8% in extended trading following a slight miss in quarterly earnings and lower-than-expected revenue guidance for the upcoming quarter.
Key Highlights:
Earnings and Revenue: Oracle reported fiscal Q2 revenue of $14.1 billion, up 9% year-on-year, with a profit of $4.21 billion, or $1.47 per share. However, the company expects revenue growth of 7% to 9% in the current quarter, projecting $14.3 billion, which falls short of analysts' estimates of $14.65 billion.
Cloud Business Growth: Oracle's cloud services, driven by high demand from AI companies like OpenAI, xAI, and Nvidia, grew 12% year-over-year and contributed 77% of the company's total revenue.
Stock Performance: Despite the recent decline, Oracle’s stock has surged 80% this year, pushing its market value from under $165 billion in late 2022 to over $500 billion.
AI Demand Fuels Oracle’s Growth
Oracle has benefited significantly from booming demand for computing power, particularly from AI companies training complex models. CEO Safra Catz emphasized on Monday's earnings call that Oracle’s cloud infrastructure is both faster and more cost-effective compared to competitors like Google, Amazon Web Services, and Microsoft. "We remain the preferred cloud for AI workloads," she stated.
Oracle also announced a partnership with Meta, where Meta will utilize Oracle’s AI cloud infrastructure to develop its Llama AI models.
Analyst Expectations and Market Reaction
The company’s failure to meet elevated market expectations weighed heavily on its stock, which has otherwise seen a meteoric rise in 2024. Monday’s decline reflects investor concerns over whether Oracle can sustain its impressive growth, particularly in its AI-driven cloud business.
While Oracle’s stock has been one of the year’s top performers, Monday’s drop underscores the challenges of meeting sky-high investor expectations in a competitive and fast-paced industry.