Oracle down on mixed Q3 results but AI compute demand remains strong

Investing.com -- Oracle reported Monday fiscal second-quarter results that fell short of Wall Street estimates despite ongoing AI-led demand for cloud infrastructure.

Oracle Corporation (NYSE:ORCL ) fell nearly 7% in afterhours trading following the report.

Oracle reported adjusted EPS of $1.47 on revenue of $14.06B, missing Wall Street expectations for $1.48 on revenue of $14.12B. 

Revenue grew 9% year-over-year in constant currency (cc), accelerating from the 7% growth in the previous quarter. 

Total (EPA:TTEF ) cloud revenue was reported at $59 billion, up 24% year-over-year in cc, with Oracle Cloud Infrastructure (OCI) growing 52%.

Remaining performance obligations (RPO), a gauge of booked revenue, climbed by 49% to $97B.   "Record level AI demand drove Oracle Cloud Infrastructure revenue up 52% in Q2, a much higher growth rate than any of our hyperscale cloud infrastructure competitors," said Oracle CEO, Safra Catz.   Looking ahead, Oracle expects Q3 revenue to grow between 7% and 9%, or 9% and 11% in constant currency. Total cloud revenue growth anticipated to be between 23% and 25% (25-27% in cc).   Moreover, the company believes total revenue for fiscal 2025 can grow in double digits, and OCI can grow more than 50%.    "ORCL remains one of the few companies in our coverage seeing a product cycle, augmented by strong execution and a tangible AI narrative, further supporting growth acceleration at scale," said Wolfe Research analysts, raising their price target on the stock from $195 to $205.    Management also reiterated that capital expenditures will double in the fiscal 2025 amid strong demand.    "We acknowledge Oracle is headed toward revenue acceleration," Bank of America said in a post-earnings note.   "However, with a higher mix of cloud revenue, our concern is that scale on capex could be more challenging over time given the outsized growth from database on OCI versus apps and cross-sell of other high value cloud infrastructure services seen by hyperscalers."   Yasin Ebrahim contributed to this report.     

Source: Investing.com