Oracle slumps as muted near-term cloud outlook offsets solid Q1 earnings

A softer near-term sales outlook, despite an expected boost from AI investments, has Oracle shares facing a $34 billion hit Tuesday.

Sep 12, 2023 - 18:30

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Oracle slumps as muted near-term cloud outlook offsets solid Q1 earnings

Oracle (ORCL) - Get Free Report shares tumbled in pre-market trading after the cloud-focused enterprise software group posted a muted near-term outlook for business spending that offset modestly firmer-than-expected first quarter earnings.

Oracle said adjusted earnings for the three months ending in July, its fiscal first quarter rose 15.5% from last year to $1.19 per share, topping Street forecasts by 4 cents. Group revenues rose 9.2% to $12.5 billion, just ahead of analysts' estimates, thanks in part to 30% surge in overall cloud revenues to $4.6 billion.

Looking into the current quarter, Oracle said it sees revenue growth in the region of 5% to 7%, missing Street estimates of around 8.2%, although it sees more double-digit gains for cloud on the bank of AI demand.

"Is Generative AI the most important new computer technology ever? Maybe!," said chairman Larry Ellison. "Self-driving cars, molecular drug design, voice user interfaces—billions of dollars are being invested in AI. 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."

"The largest AI technology companies and the leading AI startups continue to expand their business with Oracle for one simple reason—Oracle's RDMA interconnected Nvidia Superclusters train AI models at twice the speed and less than half the cost of other clouds," he added.

Oracle shares were marked 9.64% lower in pre-market trading to indicate an opening bell price of $114.50 each.