Oracle Stock Headed for Worst Day of 2024 After Second Quarter Earnings Missed

Oracle Shares fell nearly 7%, their steepest drop in a year, following the database software provider’s disappointing earnings report.

The stock’s worst day in 2024 was a 5.4% drop in May. The stock is still up about 69% for the year, which would be the best annual performance since the dot-com boom of 1999.

After the close on Monday, Oracle reported fiscal second-quarter adjusted earnings per share of $1.47, a penny behind analysts’ average estimate, according to LSEG. Revenue rose 9% from a year earlier to $14.06 billion, missing the average estimate of $14.1 billion.

Net income rose 26% to $3.15 billion, or $1.10 per share, from $2.5 billion, or 89 cents per share, a year earlier. Revenue in Oracle’s cloud services business increased 12% from a year ago to $10.81 billion, representing 77% of total revenue.

“A small stumble for a stock that has created high expectations for itself,” analysts at KeyBank Capital Markets wrote in a note after Monday’s report. They still recommend buying the stock and said, “we still like Oracle going into 2025.”

For the current quarter, Oracle expects revenue growth of 7% to 9%. At the midpoint of that range, revenue would be about $14.3 billion. Analysts had expected sales of $14.65 billion, according to LSEG. The company said it expects adjusted earnings of $1.50 to $1.54 per share. Analysts expected earnings per share of $1.57.

Oracle’s biggest growth driver has been cloud infrastructure, with which it competes Amazon, microsoft and Google as companies move workloads out of their own data centers.

Business is booming due to growing demand for computing power that can handle artificial intelligence projects. Oracle said revenue at its cloud infrastructure unit rose 52% from a year earlier to $2.4 billion.

Oracle said it just signed an agreement with Goalallowing the social media company to use its infrastructure to help with various projects related to the Llama family of large language models.

“Oracle Cloud Infrastructure trains several of the world’s leading generative AI models because we are faster and less expensive than other clouds,” Oracle founder Larry Ellison said in a statement.

Analysts at Piper Sandler raised their price target on the stock to $210 from $185 “based on continued cloud momentum.” They cited Oracle’s cRPO (current remaining performance obligations) growth of 20%. Those figures point to contracted revenue that has not yet been accounted for.