- Stock slumps 8.5% after US market closed on Monday
- Cloud and overall revenue came in short
- CEO flags ‘astronomical rate’ of demand, but challenges await
A 15% rally since late October is starting to unravel for software database giant Oracle (ORCL:NYSE) after its cloud growth showed further signs of slowing.
Oracle’s cloud revenue jumped 25% to $4.8 billion, but that was down from 30% in the previous quarter, marking a second straight quarter of slowing growth for the company. Overall quarterly revenue of $12.9 billion was also light of forecasts that had called for $13.05 billion, sending the stock spiralling 8.5% lower in after-hours trading.
The stock is poised to open at around $105 when trading reopens on Wall Street later today.
BATTLING THE BIG GUNS
Oracle has been striving to expand its cloud infrastructure business to better compete with industry giants like Amazon (AMZN:NASDAQ), Microsoft (MSFT:NASDAQ) and Alphabet’s (GOOG:NASDAQ) Google.
The company’s near-40% 2023 share price rally was largely fuelled by faster cloud growth.
In defence, CEO Safra Catz said that demand for Oracle’s cloud services is increasing at an ‘astronomical rate’, and there is truth in that the Austin, Texas-based business is currently building out OCI superclusters (Oracle Cloud Infrastructure) to satisfy the accelerating demand for AI workloads.
COSTLY COMPETITION TO BE IN
It was reported in November that cloud computing giants Google, Amazon and Microsoft upped their capital spending to a combined $42 billion for the three months up to September.
Shares wrote (7 Dec) that Oracle needs to show it can accelerate growth if it is to keep its higher rating, which you can read here.
In the meantime, other challenges await. ‘The future growth of Oracle’s cloud business will not only depend on customer demand but also on the availability of graphics processors used in data centres for powering AI workloads’ said Mizuho analyst Siti Panigrahi, who highlighted this as a crucial factor in determining future gains.
