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Oracle Misses Sales Targets While Touting AI Cloud Contracts

Oracle’s shares fell by 9% in extended trading following the company’s fiscal first-quarter earnings report, which included revenue and guidance below analysts’ expectations. Here are the key highlights from Oracle’s earnings report:

Earnings: Oracle reported adjusted earnings of $1.19 per share, surpassing analysts’ expectations of $1.15 per share.

Revenue: The company reported revenue of $12.45 billion, slightly missing analysts’ expectations of $12.47 billion.

Guidance: Oracle’s guidance for the fiscal second quarter included adjusted net income of $1.30 to $1.34 per share and revenue growth of 5% to 7%. Analysts had predicted $1.33 in adjusted earnings per share and $13.28 billion in revenue, implying 8% revenue growth.

Q1 Performance: Oracle’s revenue grew by 9% year-over-year in the fiscal first quarter, with net income reaching $2.42 billion, or 86 cents per share, compared to $1.55 billion, or 56 cents per share, in the same quarter last year.

Impact of Cerner Acquisition: Oracle‘s acquisition of Cerner for $28.2 billion in June 2022 led to an “accelerated transition” of Cerner to the cloud, which temporarily slowed down its revenue growth. This transition caused near-term headwinds as customers shifted from licensed purchases to cloud subscriptions.

Segment Performance: Oracle’s cloud services and license support segment generated $9.55 billion in revenue, up 13% YoY. However, the cloud license and on-premises license segment reported $809 million in revenue, a 10% decrease. Hardware revenue also declined by 6% YoY to $714 million.

Cloud Infrastructure: Revenue from cloud infrastructure reached $1.5 billion, a 66% increase, although the growth rate slowed compared to the previous quarter. Oracle remains smaller than major cloud competitors such as Amazon, Google, and Microsoft.

AI and Cloud Growth: Oracle highlighted that AI development companies have signed contracts for more than $4 billion of capacity in its Gen2 Cloud, indicating strong growth in its cloud services.

Overall, while Oracle’s earnings exceeded expectations, the slightly weaker revenue and guidance, along with the impact of the Cerner acquisition transition, contributed to the after-hours drop in its stock price. Despite this, Oracle’s shares have seen significant growth year-to-date, rising by 55%.

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