Oracle’s Stock Takes a Hit
Oracle’s stock plummeted almost 11% on Thursday following a quarterly report that revealed rising AI costs and disappointing revenue figures.
After the market closed on Wednesday, Oracle announced capital expenditures of $12 billion for the second fiscal quarter, a significant increase from about $4 billion a year ago and notably above the $8 billion forecasted by analysts. Additionally, the company raised its full-year capital spending projection to $50 billion, up from a previous estimate of $35 billion.
In terms of revenue, Oracle reported $16.06 billion for the second fiscal quarter, which represents a 14% increase year-over-year but fell short of the $16.21 billion analysts were expecting.
This drop in stock price marked Oracle’s largest single-day decline since January.
Investor concerns persist, particularly regarding the company’s AI division and its backlog of orders, which haven’t done much to ease skepticism about increasing costs.
On a positive note, Oracle Cloud Infrastructure (OCI) saw revenue rise by 68% to $4.1 billion, aligning closely with analyst predictions.
The company also shared that its AI-driven remaining performance obligations (RPO)—a gauge of future revenue from customer contracts—shot up roughly 440% year-over-year, reaching $523 billion by November 30. Doug Kehring, the CFO, attributed this increase to new commitments from major players such as Meta and Nvidia.
Furthermore, Oracle’s adjusted earnings per share reached $2.26, exceeding Wall Street’s estimate of $1.64 and improving from $1.47 the previous year.
Oracle also increased its long-term sales outlook, adjusting the fiscal 2027 sales forecast up by $4 billion to a total of $89 billion.
As investors scrutinize cloud companies for any signs of an AI bubble, Oracle’s stock has dropped nearly 40% since hitting a peak in September. In contrast, major tech stocks, labeled the “Magnificent Seven,” have risen by 10% during the same timeframe. There are growing worries about Oracle’s increasing debt and its reliance on OpenAI to achieve ambitious revenue targets.
Despite Thursday’s plunge, Wall Street analysts remain optimistic about Oracle’s future. Analyst Sebastian Nagy from William Blair noted that while the company’s rising capital expenses and debt are concerning, it stands to benefit from the shift to AI platforms as it enhances significant computing capacity for its expanding client base.
