Oracle Corporation shares plummeted nearly 7% on Tuesday, marking their steepest single-day drop this year, following a weaker-than-expected fiscal Q2 earnings report. Despite the decline, Oracle’s stock remains up 69% year-to-date, positioning it for its best annual performance since 1999.
Earnings Miss Sparks Investor Concerns
The database and cloud computing giant reported adjusted earnings per share (EPS) of $1.47, narrowly missing analysts’ expectations of $1.48, according to LSEG data. Revenue rose by 9% year-over-year to $14.06 billion, falling short of the $14.1 billion consensus estimate.
Net income surged 26% to $3.15 billion, or $1.10 per share, compared to $2.5 billion, or $0.89 per share, during the same quarter last year. While Oracle’s cloud services revenue climbed 12% to $10.81 billion—comprising 77% of total revenue—the miss underscored high investor expectations.
“A bit of a stumble here for a stock that’s created some lofty expectations for itself,” noted analysts at KeyBank Capital Markets, who maintained a “Buy” rating and expressed optimism heading into 2025.
Cloud Infrastructure Fuels Growth
Oracle’s cloud infrastructure unit emerged as a standout performer, with revenue soaring 52% year-over-year to $2.4 billion. The company attributed this growth to increasing demand for computing power capable of supporting artificial intelligence (AI) workloads.
Oracle announced a significant partnership with Meta Platforms, enabling the social media giant to leverage Oracle’s infrastructure for projects related to its Llama large language models.
“Oracle Cloud Infrastructure trains several of the world’s most important generative AI models because we are faster and less expensive than other clouds,” said Larry Ellison, Oracle’s founder, in a statement.
Mixed Outlook Dampens Sentiment
For Q3, Oracle forecasted revenue growth of 7% to 9%, equating to approximately $14.3 billion at the midpoint—below analyst expectations of $14.65 billion. The company also projected adjusted EPS of $1.50 to $1.54, slightly missing consensus estimates of $1.57.
Despite the tempered outlook, analysts at Piper Sandler raised their price target for Oracle shares from $185 to $210, citing continued momentum in cloud services and a 20% rise in current remaining performance obligations (cRPO), a key indicator of future revenue.
Balancing Challenges and Opportunities
While Oracle faces pressure to meet lofty market expectations, its growth in the cloud sector and pivotal partnerships with companies like Meta position it competitively against rivals such as Amazon Web Services (AWS), Microsoft Azure, and Google Cloud.
The stock’s performance reflects a balance of optimism over long-term prospects in AI-driven cloud computing and short-term challenges in meeting aggressive market targets.
