Oracle stock slid late Monday, after the database software giant reported fiscal second quarter earnings and sales that were just shy of consensus estimates. With the 47-year-old database software giant's stock up 80% on the year heading into the report, one analyst called the stock's decline following the results "a story of expectations."
Oracle said in a news release that it earned an adjusted $1.47 per share on sales of $14.06 billion for the November-ended quarter. Analysts polled by FactSet projected the Austin, Texas-based company would post adjusted earnings of $1.48 per share on sales of $14.12 billion. Sales increased 9% while earnings increased 9.7%.
On the stock market today, Oracle stock is down more than 5% to 180.37 in after-hours action. Shares fell by as much as 8% following the report, before recovering. Before that, Oracle stock lost a fraction to close at 190.54 in regular trading Monday.
Cloud Growth Accelerates With AI Demand
The software firm's closely-watched Oracle Cloud Infrastructure business grew revenues 52% year over year to $2.4 billion, accelerating from 45% growth in Oracle's previous quarter. Prior to the report, Jefferies analyst Brent Thill wrote that investors were likely looking for 52% growth for the cloud infrastructure business.
Helped by AI startups renting computing power, OCI has grown quickly in recent quarters and emerged as a fourth enterprise cloud option, chasing the much-larger hyperscalers Amazon.com (AMZN), Microsoft (MSFT) and Alphabet's Google.
Oracle Chief Executive Safra Catz said in a news release Monday that "record level AI demand" powered OCI to a "much higher growth rate than any of our hyperscale cloud infrastructure competitors."
Catz added, "With our remaining performance obligation (RPO) up 50% to $97 billion, we believe our already impressive growth rates will continue to climb even higher. This fiscal year, total Oracle Cloud revenue should top $25 billion."
Oracle's overall cloud revenue increased 24% year over year to $5.9 billion. Cloud sales grew 21% in Oracle's August quarter.
Watching Guidance For Oracle Stock
Oracle is expected to provide guidance for the current quarter on a conference call with analysts shortly. Prior to Oracle's results, analysts were projecting sales of $14.6 billion for the February-ending quarter, representing 10% year-over-year growth.
Barclays analyst Raimo Lenschow, who is bullish on Oracle, wrote to clients following the report that the negative response is a "story of expectations."
"We do not totally agree with the big negative reaction to Oracle's Q2 results," he added. "Revenue growth accelerated in Q2 to roughly 9% year over year (was roughly 8% in Q1) and with that the fiscal year guidance remains intact. Guidance on the call will be important."
Oracle Stock: 94 Composite Rating
Meanwhile, the tech giant's shares are ahead 83% overall this year, not counting Monday's late action. That puts Oracle stock on pace for its best year since 1999. Oracle stock had gained by a double-digit percentage after each of its previous three earnings reports.
Heading into the report, Oracle stock had an IBD Composite Rating of 94 out of 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. Further, the best growth stocks have a Composite Rating of 90 or better.
Further, Oracle's IBD Relative Strength Rating was 92 out of 99. The RS Rating means that Oracle has outperformed 92% of all stocks over the past year.
