Oracle Shares Slide on Earnings and Revenue Miss

Oracle Corporation (ORCL) shares took a hit on Monday after the company reported fiscal second-quarter earnings and revenue that fell short of analyst expectations. The database software giant's stock slid over 7% in extended trading following the release of its results.

Oracle reported adjusted earnings per share (EPS) of $1.47 on revenue of $14.06 billion, missing Wall Street estimates for $1.48 on revenue of $14.12 billion. The company's second-quarter sales grew 9% year over year, while net income increased 26% to $3.15 billion, or $1.10 a share, from $2.5 billion, or 89 cents a share, a year earlier.

Oracle's cloud services business, which accounts for 77% of total revenue, saw a 12% increase in sales from a year earlier to $10.81 billion. However, the company's cloud infrastructure unit, which has been a significant growth engine, reported a 52% increase in revenue to $2.4 billion, driven by record-level AI demand. Despite the strong growth in AI, the overall revenue miss may have contributed to the share price decline.



Oracle's CEO, Safra Catz, attributed the growth in the AI segment to extraordinary demand for AI training and related tasks. She highlighted that GPU consumption was up 336% in the quarter and that Oracle had delivered the world's largest and fastest AI supercomputer, scaling up to 65,000 NVIDIA H200 GPUs. Catz also noted that Oracle's cloud infrastructure unit is expected to surpass $25 billion in revenue in fiscal 2025, thanks to companies adopting its software to train generative AI models.



Oracle's AI growth rate in its cloud infrastructure business was 52% in the recent quarter, significantly higher than the growth rates of its hyperscale cloud infrastructure competitors. This rapid growth is driven by record-level AI demand, with GPU consumption up 336% in the quarter. Oracle's AI SuperComputer, scaling up to 65,000 NVIDIA H200 GPUs, is the world's largest and fastest, enabling the company to train several of the world's most important generative AI models more quickly and cost-effectively than other clouds.

Oracle's recent agreement with Meta Platforms for the Oracle AI Cloud Infrastructure further underscores its competitive edge in the AI market. The company's ability to train AI models faster and less expensively than other clouds is a key differentiator, driving growth in its AI segment.

In conclusion, Oracle's earnings and revenue miss in the second quarter may have contributed to the share price decline. However, the company's strong growth in AI and its competitive edge in the AI market suggest that Oracle remains well-positioned for future growth. As AI demand continues to rise, Oracle's cloud infrastructure unit is expected to remain a significant driver of revenue growth. Investors should monitor Oracle's performance closely as the company continues to capitalize on the growing demand for AI and cloud services.