Oracle Shares Plunge on Earnings Miss Despite Strong Cloud Growth

Oracle shares experienced their sharpest single-day decline of 2024, falling nearly 7%, after the database software company reported disappointing second-quarter earnings, CNBC reports. This marks the stock's worst performance since May, although shares remain up approximately 69% for the year—a performance that would be the best since 1999.

Oracle reported adjusted earnings per share of $1.47 for the fiscal second quarter, slightly below analysts' average estimate of $1.48, according to LSEG. Revenue increased by 9% year-over-year to $14.06 billion, missing the projected $14.1 billion average. Net income rose 26% to $3.15 billion, while revenue in Oracle's cloud services business jumped 12% to $10.81 billion, representing 77% of total revenue.

"A bit of a stumble here for a stock that's created some lofty expectations for itself," analysts at KeyBank Capital Markets wrote in a note following the earnings report. Despite the miss, they maintained a "buy" rating, stating, "we still like oracle heading into 2025."

Oracle's outlook for the current quarter also fell short of expectations. The company forecasts revenue growth of 7% to 9%, implying revenue of approximately $14.3 billion at the midpoint. Analysts had projected sales of $14.65 billion. Adjusted earnings per share are expected to be $1.50 to $1.54, compared to analysts' forecast of $1.57.

Oracle's cloud infrastructure business, a key driver of growth, continues to thrive, fueled by the increasing demand for computing power needed for AI projects. Revenue in this segment surged 52% year-over-year to $2.4 billion. The company highlighted a new agreement with Meta, enabling the social media giant to utilize Oracle's infrastructure for projects related to its Llama family of 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," Oracle founder Larry Ellison said in a statement. Analysts at Piper Sandler raised their price target on Oracle's stock to $210 from $185, citing continued cloud momentum and strong cRPO (current remaining performance obligations) growth of 20%.