ORCL Stock Drops $40 – Just Profit Taking or Rethinking Oracle’s Weak Q2 Result?
Although revenue was below forecast in Oracle's most recent earnings report, a daring new forecast for cloud growth propelled shares to...
Quick overview
- Oracle's latest earnings report showed a revenue miss but a strong cloud growth projection, leading to record-high shares before a pullback.
- CEO Safra Catz announced a 77% growth forecast for cloud infrastructure revenue, aiming for $18 billion this fiscal year.
- Despite a dip in stock price, Oracle's long-term outlook remains optimistic with projected cloud revenues reaching $144 billion in four years.
- Investors are questioning whether the recent share pullback is a healthy correction or a sign of skepticism towards Oracle's cloud strategy.
Although revenue was below forecast in Oracle’s most recent earnings report, a daring new forecast for cloud growth propelled shares to all-time highs before a steep decline the next day.
A Surge on Cloud Optimism
On Thursday, Oracle shares jumped to an all-time high of $347.72—about 37% higher on the day—after CEO Safra Catz unveiled a major upgrade to the company’s cloud growth outlook. The enthusiasm, however, was tempered by a $40 retreat the following session, with shares sliding closer to $300.
For now, the move looks like profit-taking, though it could also signal investor reassessment of Oracle’s earnings shortfall, especially with stock markets making decent gains due to softer US labor numbers today.
ORCL Chart Daily – Continuing the Fall After Hours
Catz’s Cloud Forecast
Catz revealed that Oracle expects cloud infrastructure revenue to grow 77% this fiscal year, reaching $18 billion. The company’s remaining performance obligations (RPO), a measure of future contracted revenue, soared to a record $455 billion—evidence of strong long-term demand.
Management outlined a multi-year trajectory, projecting cloud revenues to climb to $32 billion, $73 billion, $114 billion, and eventually $144 billion over the next four years. This ambitious roadmap underscores Oracle’s conviction that AI-powered cloud services will drive sustained growth.
Stock Performance and Market Momentum
Oracle has been one of 2024’s standout performers, climbing more than 120% from April lows to late July highs. After a summer dip that brought the stock below its 50-day average, momentum reignited in September with the earnings release and new guidance, propelling Oracle back into record territory.
Oracle Q2 Earnings Snapshot
- Total Revenue: $14.9B (+14% YoY, slightly below estimates)
- Cloud Revenue: $7.2B (+28% YoY, now nearly half of total revenue)
- Net Income: $2.9B (stable)
- Diluted EPS: $1.01 (+1.9% YoY)
- Operating Income: $4.2B (+7%)
- RPO: $455B (+359%, record high)
Key Takeaways
While Oracle’s revenue miss raised eyebrows, the strong growth in cloud and AI infrastructure painted a much more optimistic story. Stable profitability, rising operating margins, and record-high future obligations show Oracle is doubling down on long-term growth rather than near-term earnings.
Investors now face a critical question: was the share pullback a healthy correction after overexuberance, or a warning that markets may need more proof before fully buying into Oracle’s cloud-first vision?
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