Oracle Misses Q3 Estimates as Cloud Growth Slows, Stock Under Pressure

Oracle Corporation (NYSE: ORCL) reported its fiscal third-quarter earnings after the market close on March 10, 2025, delivering results that came in slightly below analyst expectations on both the top and bottom lines. The company posted adjusted earnings per share of $1.47, just shy of the anticipated $1.49, while revenue came in at $14.13 billion, missing the consensus estimate of $14.4 billion. Despite a 6.4% year-over-year revenue increase, Oracle faced a challenging quarter, with its growth metrics not quite meeting market expectations.

One of the key focal points for investors was Oracle’s cloud infrastructure performance, which remains the primary driver of its long-term growth strategy. Cloud revenue, including Infrastructure-as-a-Service (IaaS) and Software-as-a-Service (SaaS), reached $6.2 billion, missing the $6.3 billion estimate. In constant currency, cloud revenue grew 25%, slightly below the expected 26.5%. Meanwhile, the IaaS segment, a crucial component of Oracle’s AI-driven growth narrative, generated $2.7 billion in revenue, also falling short of the $2.71 billion forecast. On a constant currency basis, IaaS growth came in at 51%, lower than the expected 54.2%, raising some concerns about whether the company’s AI and cloud momentum remains strong enough to counteract competitive pressures.

Oracle’s remaining performance obligations (RPO), which serve as an indicator of future revenue growth, showed robust expansion. Total RPO reached $97 billion, reflecting a 49% year-over-year increase in U.S. dollars and a 50% gain in constant currency. This was a bright spot for the company, reinforcing expectations for sustained long-term demand, particularly in cloud services. However, investors had been looking for RPO growth to surpass the $6.2 billion street estimate, which added to concerns about the pace of Oracle’s near-term revenue expansion.

Despite these challenges, Oracle maintained solid profitability. Adjusted operating income rose 7% year-over-year to $6.2 billion, only slightly below the $6.25 billion estimate. The adjusted operating margin remained steady at 44%, in line with the prior year and ahead of the expected 43.6%. This suggests that while revenue came in softer than expected, Oracle was able to sustain its cost efficiency, which remains a key factor in driving shareholder value.

Currency fluctuations had a mixed impact on Oracle’s performance this quarter. The company previously faced headwinds from a strong U.S. dollar, which negatively affected revenue growth due to its significant international exposure. However, the dollar’s decline by 6% since mid-January provided some relief, contributing to an 8% year-over-year increase in revenue on a constant currency basis. That said, this figure still fell short of the anticipated 9.09% growth, signaling that foreign exchange benefits were not enough to offset broader growth challenges.

Looking ahead, Oracle’s ability to capitalize on AI-driven revenue remains a crucial theme for investors. The company’s participation in the $100 billion Stargate AI initiative, alongside key industry players like SoftBank and OpenAI, is expected to provide long-term tailwinds. However, competition from Microsoft, Amazon, and emerging AI firms like DeepSeek remains an overhang, particularly as Oracle seeks to expand its cloud infrastructure footprint. Analysts will be closely monitoring Oracle’s ability to maintain IaaS growth above 50%, as any sustained deceleration could impact the stock’s valuation.

In response to the earnings report, Oracle shares saw an initial dip in after-hours trading, reflecting investor disappointment over the slight revenue and EPS misses. The stock, already down 7% in the past week and 20% from its November peak, faces continued pressure as broader market concerns—including technology sector weakness and tariff-related disruptions—persist. With shares now trading below their 200-day moving average, Oracle will need a strong Q4 performance and clearer AI revenue visibility to regain investor confidence and reverse its recent downtrend. Investors will be particularly focused on guidance for cloud infrastructure growth and any updates on large AI-driven contract wins in the coming quarters.