{"id":2732,"date":"2025-12-11T17:05:14","date_gmt":"2025-12-11T17:05:14","guid":{"rendered":"https:\/\/microvibenews.com\/?p=2732"},"modified":"2025-12-11T17:05:14","modified_gmt":"2025-12-11T17:05:14","slug":"oracle-drops-on-disappointing-cloud-sales-more-ai-spending","status":"publish","type":"post","link":"https:\/\/microvibenews.com\/?p=2732","title":{"rendered":"Oracle drops on disappointing cloud sales, more AI spending"},"content":{"rendered":"

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Oracle Corp. shares fell 11% in early trading after the company reported a jump in spending on AI data centers and other equipment, rising outlays that are taking longer to translate into cloud revenue than investors want.<\/p>\n

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Fiscal second-quarter cloud sales increased 34% to $7.98 billion, while revenue in the company\u2019s closely watched infrastructure business gained 68% to $4.08 billion. Both numbers fell just short of analysts\u2019 estimates.\u00a0<\/p>\n

Known for its database software, Oracle has recently found success in the competitive cloud computing market. It\u2019s engaging in a massive data center build-out to power AI work for OpenAI and also counts companies such as ByteDance Ltd.\u2019s TikTok and Meta Platforms Inc. as major cloud customers.<\/p>\n

Remaining performance obligation, a measure of bookings, jumped more than fivefold to $523 billion in the quarter, which ended Nov. 30, the company said Wednesday in a statement. Analysts, on average, estimated $519 billion, according to data compiled by Bloomberg.Play Video<\/p>\n

Still, Wall Street has raised doubts about the costs and time required to develop AI infrastructure at such a massive scale. Oracle has taken out significant sums of debt and committed to leasing multiple data center sites.<\/p>\n

\u201cOracle faces its own mounting scrutiny over a debt-fueled data center build-out and concentration risk amid questions over the outcome of AI spending uncertainty,\u201d said Jacob Bourne, an analyst at Emarketer. \u201cThis revenue miss will likely exacerbate concerns among already cautious investors about its OpenAI deal and its aggressive AI spending.\u201d<\/p>\n

Investors want to see Oracle turn its higher spending on infrastructure into revenue as quickly as it has promised. Capital expenditures, a metric of data center spending, were about $12 billion in the quarter, an increase from $8.5 billion in the preceding period. Analysts anticipated $8.25 billion in capital spending in the quarter.\u00a0<\/p>\n

Oracle now expects capital expenditures will reach about $50 billion in the fiscal year ending in May 2026 \u2014 a $15 billion increase from its September forecast \u2014 executives said on a conference call after the results were released.<\/p>\n

\u201cThe vast majority of our cap ex investments are for revenue generating equipment that is going into our data centers and not for land, buildings or power that collectively are covered via leases,\u201d Principal Financial Officer Doug Kehring said on the call. \u201cOracle does not pay for these leases until the completed data centers and accompanying utilities are delivered to us.\u201dPlay Video<\/p>\n

Annual revenue will be $67 billion, affirming an outlook the company gave in October.<\/p>\n

\u201cAs a foundational principle, we expect and are committed to maintaining our investment grade debt rating,\u201d Kehring added.<\/p>\n

Oracle\u2019s cash burn increased in the quarter and its free cash flow reached a negative $10 billion. Overall, the company has about $106 billion in debt, according to data compiled by Bloomberg.<\/p>\n

The shares fell 11% to $198.30 in early trading before markets opened in New York. The stock has lost about a third of its value since Sept. 10, when investor enthusiasm about Oracle\u2019s cloud business pushed the company to an all-time high.<\/p>\n

\u201cOracle is very good at building and running high-performance and cost-efficient cloud data centers,\u201d Clay Magouyrk, one of Oracle\u2019s two chief executive officers, said in the statement. \u201cBecause our data centers are highly automated, we can build and run more of them.\u201d<\/p>\n

This is Oracle\u2019s first earnings report since longtime Chief Executive Officer Safra Catz\u00a0was succeeded\u00a0by Magouyrk and Mike Sicilia, who are sharing the CEO post.<\/p>\n

Part of the negative sentiment from investors in recent weeks is tied to increased skepticism about the business prospects of OpenAI, which is seeing more competition from companies like Alphabet Inc.\u2019s Google, wrote Kirk Materne, an analyst at Evercore ISI, in a note ahead of earnings. Investors would like to see Oracle management explain how they could adjust spending plans if demand from OpenAI changes, he added.<\/p>\n

In the quarter, total revenue expanded 14% to $16.1 billion. The company\u2019s cloud software application business rose 11% to $3.9 billion. This is the first quarter that Oracle\u2019s cloud infrastructure unit generated more sales than the applications business.<\/p>\n

Earnings, excluding some items, were $2.26 a share. The profit was helped by the\u00a0sale of Oracle\u2019s holdings\u00a0in chipmaker Ampere Computing, the company said. That generated a pretax gain of $2.7 billion in the period. Ampere, which was backed early in its life by Oracle, was bought by Japan\u2019s SoftBank Group Corp. in a transaction that closed last month.<\/p>\n

In the current period, which ends in February, total revenue will increase 19% to 22%, while cloud sales will increase 40% to 44%, Kehring said on the call. Both forecasts were in line with analysts\u2019 estimates.<\/p>\n<\/div>\n

#Oracle #drops #disappointing #cloud #sales #spending<\/p>\n","protected":false},"excerpt":{"rendered":"

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