Oracle expects Q3 revenue lower than expected due to slow cloud investment; shares drop

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Oracle expects Q3 revenue lower than expected due to slow cloud investment; shares drop
Oracle expects Q3 revenue lower than expected due to slow cloud investment; shares drop

Oracle forecast lower-than-expected quarterly revenues, blaming a fragile economy and rising competition in the cloud market.

Oracle (ORCL.N) estimated quarterly sales below projections on Monday, citing an uncertain economy and increased competition in the cloud computing business, sending its shares down more than 7% in extended trade.

Sticky inflation and high borrowing costs have caused enterprises to reduce spending, harming companies like Oracle that rely on enterprise spending.

In October, Alphabet (GOOGL.O), Google’s parent company, also posted the slowest growth in its cloud sector in at least 11 quarters, prompting concerns about demand.

The Cerner business Oracle bought last year, as well as continued weak enterprise expenditure, could have been a significant drag on earnings.

According to LSEG data, Oracle expects revenue growth, including Cerner, to be in the range of 6%–8% for the current quarter, the midpoint of which is lower than analysts’ average expectation of 7.6%.

Total sales increased 4%, including Cerner, and 6%, excluding Cerner, according to CEO Safra Catz on an earnings call.

Oracle has been working to improve its AI infrastructure as businesses want to implement generative AI. However, market leaders Amazon (AMZN.O.) and Microsoft (MSFT.O.) continue to dominate.

Larger firms have already made significant inroads into the AI ecosystem, restricting Oracle’s ability to earn a significant market share.

Microsoft surpassed Wall Street expectations for first-quarter earnings across all categories in October, with its AI products driving growth in the cloud computing business.

According to LSEG statistics, Oracle posted second-quarter sales of $12.94 billion, which was lower than analysts’ average forecast of $13.05 billion.

Its adjusted earnings per share of $1.34 for the quarter ended Nov. 30 narrowly beat expectations.

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