Oracle Stock Plummets as Latest Earnings Show Cloud Spending Slowdown
Key takeaways
- Oracle released its latest quarterly earnings, which showed promising revenue growth and earnings per share that surpassed forecasts
- However, Wall Street fixated on the predicted slowdown in cloud growth
- Oracle stock dropped almost 15% during trading
Shares in Oracle fell today as the company’s latest quarterly earnings were on the whole positive but predicted a slowdown in next quarter’s cloud growth — especially after the previous quarter’s report had been promising on this front.
Naturally, Wall Street sold off the stock at the first sign of trouble. But the rest of Oracle’s report wasn’t as bad as the stock drop suggests — in fact, there was more than one bright spot in the earnings to suggest investors might have been too hasty.
Here’s the latest on what Oracle’s latest earnings report shaped up like and how far the stock fell afterwards.
What happened with Oracle’s earnings report?
On the face of it, Oracle’s latest quarterly earnings looked promising: the tech software company grew its revenue by 9% to $12.45 billion, just short of analyst consensus at $12.47 billion. Earnings per share arrived at $1.19, an improvement on the expected $1.15.
There were other positives: Oracle’s enterprise software for bigger companies saw revenue growth of 21% to $800 million. The company is also bullish on AI, with president and CTO Larry Ellison saying during the earnings call, “As of today, AI development companies have signed contracts to purchase more than $4 billion of capacity in Oracle’s Gen2 Cloud. That’s twice as much as we had booked at the end of Q4.”
However, there was one major issue: cloud computing growth. The revenue growth for cloud in the reported quarter was actually great — there was a 30% boost to cloud revenue, hitting $4.6 billion, and cloud infrastructure shot up 66% to $1.5 billion.
But the kicker was that Oracle warned that a slowdown in cloud spending in its current quarter was ahead, sending investors running for the hills. Oracle predicts a 5% to 7% top-line growth to $13 billion, but that was below the $13.3 billion predicted by Wall Street.
How did the markets react?
Expectations were always going to be high for Oracle, given the company’s share price had gained 51% in 2023 before Tuesday’s report. As excitement mounted, the stock rose 4.6% in the week running up to the earnings beat.
Between the end of Monday trading and Tuesday trading, Oracle’s share price fell as much as 14.8% as investors digested the softer-than-expected future cloud growth guidance. It recovered somewhat during Wednesday trading by 2.4%, but the damage was already done.
The bottom line
Oracle was a victim of its success with this latest quarterly report and Wall Street’s reaction. The expectations were so high that the slightest sign of bad news sent traders into a tizzy — and, honestly, Oracle has just stumbled because of its own hype.
When you look past the cloud revenue slowdown, Oracle’s financials were still solid — and the company reissued its target to hit $65 billion in revenue by 2026. This is a temporary blip for Oracle’s stock, not a downward spiral.
