(Updated - December 12, 2023 4:46 AM EST)
Shares of Oracle (NYSE:ORCL) dropped over 8% in pre-market Tuesday after the company posted weaker-than-expected revenue in its fiscal second quarter.
Oracle reported a shortfall in its quarterly revenue, attributed to a challenging economic environment and heightened competition in the cloud computing sector, impacting the demand for its cloud services.
Oracle said its Q2 revenue was $12.9 billion (up 5% year-over-year), missing the consensus estimate of $13.05B. EPS came in at $1.34, compared to the consensus estimate of $1.33.
The company saw a 12% increase in its Cloud services and license support revenue, reaching $9.6B. However, cloud license and on-premise license revenues witnessed a downturn, decreasing 18% to $1.2B.
"Demand for our Cloud Infrastructure and Generative AI services is increasing at an astronomical rate. As a measure of that demand, Oracle's total Remaining Performance Obligations (RPO) climbed to over $65 billion—exceeding annual revenue,” said CEO Safra Catz.
Oracle offered guidance on call that came in line with analyst expectations. Adjusted EPS is seen at $1.37, which was also the consensus.
Oracle guided to +6-8% revenue growth, while the Street was looking for +8%.
"ORCL reported another disappointing quarter with a top-line miss driven by weaker-than-expected OCI revenue. While mgmt highlighted the OCI supply-demand imbalance and large deals in the pipeline, we came away with more questions than answers and believe there is more execution risk en route to FY26 targets," analysts at Jefferies said in a note.
Evercore ISI analysts said the Q2 results were mixed, although guidance "implies acceleration in 2024." The firm cut the price target by $5 to $140 per share.
"We acknowledge that Oracle is likely to remain in ‘show me’ mode in the near-term, but when digging beyond the F2Q revenue shortfall – the guidance and backlog point to a potential reacceleration in revenue in CY24 and we believe the optionality around the public cloud market opportunity represents material upside," they said.
Additional reporting by Senad Karaahmetovic