Oracle slides as it misses Wall Street revenue targets on tough cloud competition

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Oracle slides as it misses Wall Street revenue targets on tough cloud competition

stock :: 2024-12-10 :: source - reuters

By Reuters

Dec 10 (Reuters) - Oracle's (ORCL) shares sank 6% on Tuesday in premarket trading after its quarterly revenue fell short of expectations, hindered by fierce competition among database and cloud services providers.

The cloud computing company is on track to lose about $45 billion in market capitalization at current share price levels of $174.14, as per LSEG data.

Oracle's second-quarter revenue reached $14.06 billion, marking a 9% increase from the previous year, but below Wall Street estimates of $14.11 billion, as per data compiled by LSEG.

Oracle has been significantly investing in establishing new facilities, aiming to enhance its cloud infrastructure to cater to the growing demand for artificial intelligence and to bridge the gap with industry leaders.

Wall Street expectations for AI-linked firms have been high as they bet on the technology to be a strong growth driver in the future.

"With the rapid backlog build appearing to level out, investor focus likely shifts towards the income statement and Oracle's ability to convert this demand into accelerating revenues and durable double-digit EPS growth," Morgan Stanley analysts said in a note.

Despite experiencing robust growth in its cloud segment, Oracle faces stiff competition from cloud giants like Microsoft(MSFT.O) and Amazon(AMZN.O), who have a significant foothold in the industry.

"Oracle cloud infrastructure revenue remains heightened as demand for AI compute grows on the platform," said D.A. Davidson in a note.

Oracle's 12-month forward price-to-earnings ratio is 28.08, lower than Microsoft's 31.86 and Amazon's 36.66.

The company's shares have soared over 80% so far this year, but Barclays cautioned the primary headwind to the stock, besides the recent strong share price performance, will potentially rely on the firm achieving its target of double-digit revenue growth for the full year.

(Reporting by Siddarth S and Joel Jose in Bengaluru; Editing by Vijay Kishore)