Oracle faced a sharp market reaction after reporting results that triggered a more than 10% drop in its stock during extended trading. The company posted second quarter earnings of $2.26 per share before certain costs, beating the forecast of $1.64. Revenue grew 16% year on year to $16.06 billion but still came in below the $16.21 billion estimate. Net income rose to $6.14 billion from $3.15 billion a year earlier, yet investor sentiment cooled after the company gave third quarter guidance that aligned only with expectations.
Oracle said it expects earnings between $1.70 and $1.74 in the next quarter, close to the forecast of $1.72. It also predicted revenue growth between 19% and 21%, compared with the Street’s $16.87 billion estimate which implies 19% growth. Cloud revenue reached $7.98 billion, above the $7.92 billion estimate, while cloud infrastructure revenue hit $4.1 billion, up 68% from last year. Executives pointed to new cloud wins with companies across industries during their first earnings call led by the new Co-Chief executives Clay Magouyrk and Mike Sicilia.
Some analysts noted that highlighting so many customer wins signals a push to show greater stability. One analyst told a common news outlet that “the market has been really nervous about Oracle’s overreliance on OpenAI and other AI plays,” adding that the range of new clients shows encouraging diversification. However, the software business slipped 3% to $5.88 billion, missing the $6.06 billion estimate. The company also reported a massive rise in remaining performance obligations which jumped 438% to $523 billion, above the $501.8 billion forecast. Oracle said customers including Meta Platforms and Nvidia contributed to large new commitments.
The company’s large capital spending plans remain a major talking point. Oracle expects capex to rise to $50 billion this year, compared with $21.2 billion last year, as it expands data centre capacity for AI workloads. Some investors worry about the growing debt load used to support this expansion, especially since one customer has committed to more than $300 billion in cloud spending over five years. Executives attempted to reassure the market, saying Oracle aims to keep an investment grade debt rating and may use alternative financing options. The company also recorded a $2.7 billion gain from selling its stake in chip designer Ampere. Founder Larry Ellison said Oracle chose to sell because the company is moving toward “a policy of chip neutrality.” Despite recent volatility, Oracle shares remain up more than 33% this year, ahead of the technology focused Nasdaq index.
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