Dec 10 (Reuters) – Oracle recently unveiled its latest earnings, and the numbers aren’t quite what analysts were hoping for. The tech giant reported a slower growth in cloud revenue and missed profit expectations. This news sent shares down by 10% in after-hours trading.
Oracle’s adjusted earnings for the third fiscal quarter are expected to be between $1.64 and $1.68 per share, falling short of the predicted $1.72. Revenue expectations also missed the mark, projected to grow by only 16% to 18%, while analysts expected around 19.4%.
Moreover, the company revealed that capital spending would increase by $15 billion from previous estimates. Experts, like Melissa Otto from S&P Global’s Visible Alpha, noted that the rise in spending might be causing investor unease. When a company spends more than initially projected, it can lead to doubts about future profitability.
For its recent second-quarter results, Oracle showed total revenue of $16.06 billion, slightly under the $16.21 billion expected. Adjusted operating income, too, was below expectations at $6.7 billion.
Despite all this, Oracle did see its future contracts climb to $523 billion, a 14.94% jump from $455 billion reported in September. However, this was under the $526 billion analysts anticipated.
In response to a barrage of questions during a conference call, CEO Clay Magouyrk shared some inventive financing models, explaining how customers could bring their own chips to help minimize costs. He mentioned partnerships with vendors to rent data center capacity instead of upfront purchases.
Oracle’s financial movements are critical, especially amidst the ongoing AI race. Larry Ellison, Oracle’s chairman, emphasized a new strategy: the company no longer aims to design and manufacture its own chips for cloud data centers. Instead, it’s shifting to a vendor-neutral approach, which offers flexibility for its clients.
A report by eMarketer noted that Oracle’s recent revenue dip has raised concern among investors about their deals with AI companies like OpenAI. This is especially relevant given the current tech climate, where many are questioning whether there’s competition or an “AI bubble” forming in the market.
Also telling is the general trend among investors. As seen on platforms like Twitter, reactions fluctuate, reflecting the nervousness in the tech space—many are watching Oracle closely for signs of stability or further decline.
In summary, while Oracle’s current figures show some promise with a significant increase in future contracts, the overall outlook has investors worrying. The shifting strategies in chip usage and financing could play a key role in shaping the company’s future and its place in the growing AI market.
For a deeper dive into Oracle’s performance and expert analysis, check out resources from S&P Global here.
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