Oracle stock dropped more than 10% when trading began on Tuesday. On Monday, the company released its financial report for the most recent quarter, which revealed lower-than-expected revenue figures. Industry professionals focused onOracle's disappointing cloud services income.
Oracle's shares plunged more than 10% when trading opened Tuesday after its earnings report for the second quarter of the fiscal year revealed lower than expected revenue. The technology company posted an adjusted earnings per share of $1.34 which narrowly beat the prediction of $1.32 by Refinitiv (formerly LSEG). Its revenue of $12.94 billion, however, failed to meet the projected $13.05 billion. As a result, its stock dropped by more than 11% during morning trading.
In their notes to investors, Wall Street analysts pointed to the shortfall in Oracle's cloud revenue. UBS analysts wrote, "For the second consecutive quarter, Oracle did not meet the expectations for growth in Cloud/OCI and again attributed it to the slow building of infrastructure capacity. This is worrying and makes it difficult to determine why it is taking so long." Similarly, JPMorgan analysts questioned the software company's capability to rapidly increase its Oracle Cloud Infrastructure. They noted that while there is currently an overwhelming demand for OCI, Oracle may be unable to meet this demand due to the limitation in its capacity.
Deutsche Bank analysts highlighted a couple of reasons for their bullish stance on Oracle. These include two $1 billion deals announced by co-founder Larry Ellison, strong demand and its commitment to growing its OCI by at least 50% for the "next few years". Furthermore, the company is a significant consumer of central processor units from AMD and Ampere and high-powered GPUs from Nvidia. Oracle also has ties with Microsoft which allows customers access to the latter's cloud service Azure.
CNBC's Jordan Novet and Michael Bloom contributed to this report.
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