Oracle’s shares dropped 9% in extended trading as it reported current-quarter revenue projections that fell short of Wall Street targets and narrowly missed first-quarter expectations due to a challenging economic climate that restricted businesses’ cloud spending.
Businesses are rethinking their digital transformation plans after a spike in cloud demand during the pandemic, hurting Oracle as it tries to catch up in a market dominated by larger rivals like Amazon Web Services and Microsoft.
However, because of advancements in its networking technology, analysts have suggested that the increased use of artificial intelligence (AI) applications may benefit Oracle’s cloud infrastructure business.
“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,” Oracle Chairman and CTO Larry Ellison said.
Ellison, a self-described close friend of Elon Musk, announced that the Tesla CEO’s AI startup xAI had signed a contract to train AI models in Oracle’s Gen2 Cloud.
Furthermore, he stated that all nine of Berkshire Hathaway’s utility companies would use Oracle’s Fusion Cloud applications to replace their existing enterprise resource planning systems.
So far this year, Oracle stock has gained about 55%.
According to LSEG data, the company projected revenue growth for the second quarter of between 5% and 7%, below analysts’ 8.2% average estimate. Additionally, compared to expectations of $1.33, it expects an adjusted profit per share of between $1.30 and $1.34.
The first quarter’s revenue was $12.45 billion, slightly less than the $12.47 billion estimate.
It earned $1.19 per share, excluding items, compared to estimates of $1.15.
