Oracle share price slides as it misses revenue expectations

Still, Ellison talks up cloud margins, says 100 datacenters don't cost more 'to run' than 10

Oracle has seen its market valuation dip on the back of lower than expected revenue growth for Q2 of its fiscal 2024 ended November 30.

Big Red’s share price slid seven percent in extended trading last night after it announced revenue of $12.9 billion, up five percent on the same quarter a year earlier. Although this was firmly in the middle of Oracle’s own guidance, the revenue growth missed analysts' average estimate for growth of about 7.6 percent, according to LSEG data.

Net income was $2.5 billion, up 19 percent year-on-year.

On an earnings call, evidence emerged that newly acquired electronic health records software company Cerner was a drag on Oracle’s earnings. CEO Safra Catz said constant currency revenue growth was up four percent including Cerner but six percent excluding Cerner, the health software firm Oracle bought for $28 billion in June 2022.

Nathan Jackson, Megabuyte research analyst, said cloud growth was below guidance, driven by weakness within its cloud application division offsetting a strong cloud infrastructure performance.

He said future expectations would depend on the expansion of cloud infrastructure and generative AI services. “Looking further ahead, cloud database services — on-premise databases migrating to the cloud — are expected to form the third leg of Oracle's near-term growth strategy.”

Elsewhere on the call, Oracle executives promised investors it would accrue higher margins on its cloud infrastructure rival providers.

“Our OCI business is improving profitability as it grows. The target gross margins for it are much higher than I think you expect because you're probably comparing it to some of the more pure-play cloud folks who somehow don't end up making as much money in all of this,” Catz said.

Founder and CTO Larry Ellison claimed that the company's automation technologies help it deploy and run cloud services at a lower cost than its rivals. He said there was no cost in running software once it was deployed.

“It doesn't cost us more to run 100 datacenters than it costs us to run 10 in terms of data: DBAs or people running Oracle Autonomous Linux. We can run these things – we can bring them up relatively quickly, and we can run them very inexpensively and efficiently,” he said.

Users, however, might question what ratio of these savings could be passed on to them. ®

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