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Shares of Oracle (ORCL) fell sharply late Monday after the tech giant reported mixed results for its fiscal second quarter, including sales that came in short of expectations. Oracle stock was down more than 7% in late trades.
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For the three months ending in November, the software giant reported adjusted earnings of $1.34 per share on $12.9 billion in fiscal second quarter sales. On average, analysts polled by FactSet expected Oracle to earn $1.33 per share on $13.1 billion in sales.
Oracle’s revenue increased 5% from the same period last year while earnings increased 11%. Overall, revenue growth has slowed in recent quarters. Sales for Oracle jumped 18.5% year over year for the same November quarter in 2022 and then grew 18%, 17% and 9% for the quarters that followed.
In after-hours trading on the stock market today, ORCL stock sank 7% to 107.11 in recent action. The move pushed Oracle beneath its 50-day moving average.
Oracle Stock: Watching Cloud Push
On its earnings call, Oracle projected sales will grow between 6% and 8% for the current quarter. That includes revenue from Cerner, the health care industry software company that Oracle acquired last year.
Coming into earnings, Oracle stock had gained about 41% on the year. A growing group of analysts expect Oracle to seize on heightened interest in generative artificial intelligence to grow its cloud services sales. Oracle Cloud Infrastructure, or OCI, competes with Amazon (AMZN) and Microsoft (MSFT) to offer cloud computing services.
On that note, Chief Executive Safra Catz said in the company’s earnings release that demand for the company’s cloud infrastructure and generative AI service is “increasing at an astronomical rate.” Catz says Oracle’s remaining performance obligations climbed to more than $65 billion, exceeding annual revenue.
But revenue growth for OCI slowed for another quarter. Oracle Cloud Infrastructure revenue grew 52% year over year to $1.6 billion, the company said. Meanwhile, OCI sales grew 66% in the August-ending fiscal first quarter and 76% in the May-ending fiscal fourth-quarter.
Oracle’s overall cloud revenue grew 25% year over year for the latest quarter to $4.8 billion. For the August-ending quarter, cloud services revenues grew 30%. Cloud sales grew 54% in the May quarter.
Part of the challenge for the company, as it highlighted earlier this year, is building out the infrastructure for data centers to meet AI demand.
“The only limiting factor is our ability to get the data centers handed over and filled-up fast enough,” Catz said on the company’s earnings call Monday. “This quarter alone we are talking about hundreds of millions dollars that we would have been able to recognize if our capacity was available.”
However, Oracle Chairman and Chief Technology Officer Larry Ellison, says the company is making rapid progress.
“In the next few months, we are turning on 20 new Oracle cloud data centers collocated with and connected to Microsoft Azure,” Ellison said in the news release. “Simultaneously we are building dozens of new data centers in countries all over the world. Demand is over the moon.”
Oracle Stock Was Gaining Strength Heading Into Earnings
Heading into earnings, Oracle stock closed at 115.13, up 1.3% on the day Monday. Further, the IBD Stock Checkup tool shows that Oracle had a Composite Rating of 83 out of a best-possible 99. The rating means Oracle stock currently outperforms 83% of all stocks based on fundamental and technical stock-picking criteria.
In addition, shares have a Relative Strength Rating of 81 out of 99, which measures how a stock’s price performance over the last 52 weeks holds up against other stocks in IBD’s database.
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