Stocks associated with AI took a hit after the announcement, with chipmakers Nvidia and Advanced Micro Devices each dropping roughly 1%, while cloud provider CoreWeave fell more than 3%.
Here’s how Oracle’s performance compared to LSEG consensus:
- Earnings per share: $2.26 adjusted vs. $1.64 anticipated
- Revenue: $16.06 billion vs. $16.21 billion anticipated
In regards to future projections, Oracle estimated earnings per share of $1.70 to $1.74 and revenue growth of 19% to 21% for the fiscal third quarter. The LSEG consensus predicted $1.72 in earnings per share and $16.87 billion in revenue, which implies 19% growth.
Oracle’s fiscal second-quarter revenue experienced a 14% increase year-over-year for the quarter that concluded on Nov. 30, as stated in a release. Net income rose to $6.14 billion, or $2.14 per share, from $3.15 billion, or $1.13 per share, in the same quarter the previous year. Adjusted earnings exclude stock-based compensation.
The firm reported $7.98 billion in cloud revenue, surpassing the $7.92 consensus from analysts surveyed by StreetAccount. Revenue from cloud infrastructure totaled $4.1 billion, reflecting a 68% increase. Oracle also highlighted its cloud partnerships with Airbus, Canon, Deutsche Bank, LSEG, Panasonic, and Rubrik.
Software revenue dropped 3% to $5.88 billion, falling short of the $6.06 billion analyst consensus.
Remaining performance obligations, a metric of contracted revenue yet to be recognized, surged 438% to $523 billion, exceeding the $501.8 billion average analyst estimate, according to StreetAccount. Doug Kehring, Oracle’s principal financial officer, noted in the release that RPO were propelled “by new contracts from Meta, Nvidia, and other firms.” The company now anticipates an additional $4 billion in revenue for fiscal 2027, according to Kehring.
Over the last decade, Oracle has expanded its business beyond databases and enterprise software into cloud infrastructure, competing against Amazon, Microsoft, and Google. These companies are all competing for significant AI contracts and are heavily investing in data centers and necessary hardware to accommodate anticipated demand.
OpenAI, which initiated the generative AI boom with the debut of ChatGPT three years ago, has pledged to invest over $300 billion in Oracle’s infrastructure services over a five-year period.
Oracle’s report arrives at a pivotal time for the firm, which has sought to establish itself at the forefront of the AI market through extensive build-outs. While this strategy has significantly boosted Oracle’s revenue and backlog, investors have raised concerns about the level of debt the company is accruing and the risks it might face if growth slows.
During the earnings call, Kehring assured that Oracle aims to maintain its investment-grade debt status.
“Additionally, there are alternative financing options through customers who may contribute their own chips to be installed in our data centers, and suppliers who may lease their chips rather than sell them,” Kehring mentioned. “Both of these strategies allow Oracle to align our payments with our incoming revenue and considerably reduce borrowing compared to common models.”
However, with new commitments, Oracle now anticipates about $50 billion in total capital expenditures for the year, an increase from $35 billion as of September, Kehring noted. The expenditure for fiscal 2025 was $21.2 billion.
Oracle’s free cash flow for the November quarter was approximately negative $10 billion. The StreetAccount consensus predicted a negative $5.2 billion.
“We’ve reviewed numerous analyst reports, and many indicate an expectation exceeding $100 billion for Oracle to complete these expansions,” Kehring stated. “Based on what we observe currently, we believe we will require significantly less capital, if not much lesser than that figure, to finance this expansion.”
Oracle shares dropped 23% in November, marking their worst monthly performance since 2001. As of Wednesday’s closing, the stock remains 32% below its September peak, despite still being up 34% year-to-date, outperforming the Nasdaq, which increased 22% within the same timeframe.
During the quarter, Oracle appointed executives Clay Magouyrk and Mike Sicilia as the company’s new CEOs, succeeding Safra Catz. Oracle also unveiled AI agents for optimizing various aspects of finance, human resources, and sales.
Oracle indicated that GAAP and adjusted earnings were influenced by a $2.7 billion pre-tax gain from the sale of chip designer Ampere, which SoftBank agreed to acquire for $6.5 billion in March. Oracle, which previously invested in Ampere, stated at that time that it intended to divest its stake.
“Oracle divested Ampere because we no longer consider it strategic to keep designing, manufacturing, and utilizing our own chips in our cloud data centers,” Chairman and co-founder Larry Ellison stated in Wednesday’s release. He added that the company is “now committed to a policy of chip neutrality” and will continue to procure the latest graphics processing chips from Nvidia but needs “to be prepared and capable of deploying any chips our customers wish to purchase.”
— Report contributed by CNBC’s Ari Levy.
