Stock Crash: Oracle Corp shares sink 11% after revenue miss dents sentiment

Shares of Oracle Corp. fell as much as 11% in extended trading in US hours on Wednesday after its quarterly revenue missed street expectations, the EPS beat was aided by a one-time gain, and longer-than-expected revenue recognition timelines.

Oracle Corp. reported revenue of $16.06 billion for the second quarter of its fiscal year, implying a growth of 14% from last year. However, the figure was lower than the $16.21 billion estimate from analysts tracked by Bloomberg.

Oracle's cloud infrastructure segment grew by 68% from last year to $4.1 billion, a marginal miss on expectations, while the Earnings Per Share (EPS) of $2.26 surpassed the $1.64 expectation, but was aided by a stake sale in one of its investments during the quarter.

Remaining Performance Obligations (RPOs) or those future revenues from signed customer contracts that has not been recognized in the P&L yet, jumped more than five-fold from last year to $523 billion, aided by new commitments from customers such as Meta and Nvidia. There is no definite timeline on when these RPOs get recognized as revenue in the financial statements.

Sales for the software business declined 3% to $5.9 billion, lower than the $6.06 billion estimate from analysts.

For the third quarter, Oracle expects revenue growth to be between 19% to 21%, largely in-line with the 19% projection by analysts.

Oracle has raised concerns on Wall Street due to its debt-led expansion for AI infrastructure, and its over-dependence on OpenAI's $300 billion contract for its infrastructure services, the funding timelines for which remains unclear.

The company recently raised $18 billion through one of the largest bond sales in tech history and is also a bigger issuer of investment-grade debt among non-financial firms, as per Citi. Doug Kehring, Oracle's CFO, said that he remains committed to keep Oracle's investment-grade debt rating during the earnings call.

“In addition, there are other financing options through customers that may bring their own chips to be installed in our data centers and suppliers who may lease their chips rather than sell them,” Kehring said. “Both of these options enable Oracle to synchronize our payments with our receipts and borrow substantially less than most people are modeling.”

The company also increased its capex guidance for the full year to $50 billion from $35 billion earlier.

Shares of Oracle Corp are down 10.8% in extended trading at $199.02. If the losses hold in regular trading on Thursday, the stock would have corrected nearly 50% from its record high of $345 which it had hit in September after the OpenAI deal.