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Earnings Results: Oracle’s stock gets slammed as revenue comes up a bit short

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Oracle Corp.’s revenue for the latest quarter came up a bit short of expectations, with shares in the software giant dropping more than 7% in Monday’s aftermarket action.

Revenue in the fiscal second quarter rose to $12.94 billion, from $12.28 billion a year before, while the FactSet consensus was for $13.05 billion. Overall revenue was up 5%, or ahead 4% on a constant-currency basis.

Oracle
ORCL,
+1.34%

anticipates 6% to 8% revenue growth for the current quarter when including contributions from its Cerner business. The FactSet consensus calls for $13.3 billion in revenue and implied growth of about 7.5%.

“Cloud infrastructure demand is huge and growing,” Chairman Larry Ellison said on the company’s earnings call, noting that the company has to build 100 additional cloud-data centers to accommodate “billions of dollars more in contracted demand than we currently can supply.”

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In its latest quarter, Oracle generated $9.64 billion in revenue from cloud services and license support, up 12% from a year before, while analysts were looking for $9.71 billion.

Other line items registered revenue declines.

Cloud-license and on-premise-license revenue fell 18% to $1.18 billion, whereas the FactSet consensus was for $1.21 billion. Oracle reported $756 million in revenue from hardware, down 11% from a year before, as well as $1.37 billion in services revenue, down 2%. Analysts were expecting $747 million and $1.39 billion, respectively.

“Demand for our cloud infrastructure and generative AI services is increasing at an astronomical rate,” Chief Executive Safra Catz said in a release, noting that Oracle had more that $65 billion in total remaining performance obligations.

The company’s cloud businesses are approaching a $20 billion annual revenue run rate, she added.

On the earnings call, Catz said that Oracle has “a lot of capacity coming online” as its Oracle Cloud Infrastructure (OCI) product “is the ideal infrastructure for so much use.”

Ellison noted that demand for OCI isn’t just related to generative artificial intelligence but also to broader interest in cloud databases.

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The company recorded fiscal second-quarter net income of $2.50 billion, or 89 cents a share, compared with $1.74 billion, or 63 cents a share, in the year-earlier period. On an adjusted basis, Oracle posted earnings per share of $1.34, whereas analysts were modeling $1.33.

Oracle’s adjusted EPS outlook for the fiscal third quarter calls for $1.35 to $1.39, while the FactSet consensus is for $1.37.

Oracle’s stock has advanced 41% so far this year, while the S&P 500
SPX
has gained 20%.

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