Oracle (ORCL.N) fell short of Wall Street’s expectations for second-quarter revenue and operating profit on Wednesday. This may mean companies are spending less on Oracle’s cloud services, possibly due to concerns about an AI bubble. After the news, Oracle’s stock fell 5.5% in after-hours trading.
Oracle, based in Austin, Texas, reported an adjusted profit of $2.26 per share, higher than analysts’ prediction of $1.64. This figure includes a one-time pretax gain of $2.7 billion from selling its stake in Ampere Computing, a chip designer. Adjusted operating income was $6.7 billion, just below Wall Street’s target of $6.8 billion.
Oracle Chairman Larry Ellison said they sold the Ampere shares to give the company more flexibility in its data centers. Ellison explained that they no longer think it makes sense to design, make, and use their own chips. He added that Oracle will continue buying Nvidia’s latest chips and will support any chips their customers want to use.
Oracle also reported $523 billion in future contracts, nearly 15% more than the $455 billion reported in September. This increase comes from major cloud computing deals with OpenAI and other companies. Oracle is building large data centers for OpenAI. According to Reuters, OpenAI is working with Broadcom to develop custom AI chips.
Total revenue for the quarter was $16.06 billion, just below the $16.21 billion analysts expected. Although revenue was slightly lower than predicted, Oracle’s cloud business continues to secure large deals. Slower growth has raised questions about whether companies are cutting back on AI spending. After the results, Nvidia and Broadcom shares each fell by less than 1%.
Experts say Oracle’s situation reflects changes in the market. Demand for AI cloud services remains strong, but investors are cautious about prices. More companies are investing in AI. Oracle’s ability to adapt its chip and cloud strategies will be important to stay competitive.
