Oracle (ORCL) shares dropped nearly 8% to $175.89 in after-hours trading on Monday following the release of its fiscal 2025 second-quarter earnings, which did not meet Wall Street’s expectations. The company reported an adjusted earnings per share (EPS) of $1.47, a 10% increase from $1.34 in Q2 2023, though it fell just short of the expected $1.48. Moreover, Oracle’s forecast for the third quarter was also underwhelming, projecting adjusted EPS to be between $1.50 and $1.54, against the consensus estimate of $1.57.
Despite the earnings miss, Oracle’s financial performance showed significant growth in certain areas. Net income rose by 26% year-over-year to $3.15 billion, or $1.10 per share, from $2.5 billion, or 89 cents per share. The company’s cloud services sector, a critical component of Oracle’s growth strategy, saw a 12% increase in revenue to $10.81 billion, representing 77% of total revenue. This growth is primarily fueled by the cloud infrastructure segment, which soared by 52% to $2.4 billion, as businesses increasingly migrate their operations to cloud environments to leverage the power needed for artificial intelligence (AI) initiatives.
Oracle has positioned itself as a key player in the cloud infrastructure market, competing directly with giants like Amazon (AMZN), Microsoft (MSFT), and Google (GOOG, GOOGL). The company’s appeal in this space was underscored by a recent agreement with Meta (META), where Oracle’s infrastructure will support projects involving the Llama family of large language models. Oracle founder Larry Ellison emphasized in a statement that Oracle Cloud Infrastructure offers cost-effective and faster AI model training compared to other cloud services.
Looking forward, Oracle’s outlook for the current quarter anticipates revenue growth between 7% and 9%, translating to approximately $14.3 billion at the midpoint, which falls short of the $14.65 billion analysts had forecasted.
Oracle had previously raised its fiscal 2026 revenue guidance to $66 billion in September, surpassing analyst projections by about $1.5 billion. That same month, Oracle announced plans to use Nvidia’s “Blackwell” GPUs for AI-related computing clusters, signaling its commitment to expanding in the AI and cloud computing markets.
Despite the disappointing earnings report, Oracle’s stock has enjoyed a stellar year, increasing more than 80% and marking its best annual performance in 25 years. This year’s stock surge reflects investor confidence in Oracle’s strategic direction, particularly its expansion into high-demand areas like AI and cloud computing, though the latest earnings reaction suggests a moment of recalibration by investors concerning the company’s near-term growth prospects.
Oracle need to do much more to compete