By
Steve Muchoki
April 16th, 2024
Tuesday’s stock drop has not affected the performance of Oracle shares in an overall sense.
Software maker Oracle Corp (NYSE: ORCL) stock fell 12% on Tuesday, marking its biggest such dip since March 2002 when it recorded a percentage drop of 15%. The Tuesday drop, however, may be attributed to the company issuing relatively weak revenue guidance.
According to LSEG, Oracle reported a fiscal first-quarter revenue of $12.45 billion, which is slightly in variance from the $12.47 billion average analyst estimate. Also, for the current quarter, Oracle is projecting that revenue will increase by somewhere between 5% to 7%. However, the average analyst estimate for the revenue increase is pegged at 8%.
Like many other top firms across the tech industry, Oracle has been making big artificial intelligence AI moves. So much so that it recently added AI features in its Fusion Cloud and Human Capital Management Software. According to Oracle Chair Larry Ellison, it may appear that the AI tech is already doing well for Oracle’s business. In the earnings statement, Ellison said:
“As of today, AI development companies have signed contracts to purchase more than $4 billion of capacity in Oracle’s Gen2 Cloud.”
Interestingly, that is double the amount that the company had booked at the end of the previous quarter.
Similarly, revenue from Oracle’s cloud services and license support segment appreciated by 13% from last year’s figures. The revenue surpassed StreetAccount’s consensus of $9.44 billion. However, sales in the cloud license and on-premises license segment did not live up to expectations. It saw a 10% decline to $809 million, falling short of estimates.
Even with Tuesday’s stock drop, Oracle shares are up 34% year to date, beating the S&P 500, which is up 16%.
Oracle Struggling with Transition, CEO Safra Catz Says
But despite the good fortune that AI appears to be bringing to the firm, Oracle CEO Safra Catz is still wary of some troubles with the company’s Cerner unit. Catz recalls how Oracle bought the electronic health record software company for $28.3 billion in June 2022. And though Cerner is now in an “accelerated transition” to the cloud, Catz insists that some issues remain. She said:
“This transition is resulting in some near-term headwinds to the Cerner growth rate as customers move from licensed purchases, which are recognized upfront, to cloud subscriptions which are recognized ratably.”
It might be worth mentioning that Tuesday’s stock drop has not affected the performance of Oracle shares in the overall sense. It is still up more than 38% year to date, winning against the S&P 500, which is 16.68% up as of press time.