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Revenue Falls Just Short of Analyst Expectations
Shares of cloud computing giant Oracle fell more than 10% in after-hours trading on Wednesday after the company reported quarterly revenues that slightly missed Wall Street forecasts. Oracle posted $16.1 billion in revenue for the three months ending in November, compared with the $16.2 billion projected by analysts.
Despite the small miss, revenue still grew 14% year-over-year, driven largely by the company’s AI-focused business, Oracle Cloud Infrastructure (OCI), which reported a 68% surge in sales. OCI supports major AI developers, and demand for Oracle’s AI infrastructure has been a key factor in the company’s recent share gains.
AI Growth Amid Market Concerns
Oracle’s AI business has received significant attention, particularly following a high-profile deal with OpenAI in September, under which OpenAI agreed to purchase $300 billion in computing power from Oracle over five years. The partnership briefly propelled Oracle chairman and CTO Larry Ellison to the title of the world’s richest person.
However, investors remain cautious. Oracle shares have lost about 40% of their value since peaking three months ago, although they remain up over a third since the start of the year. Analysts note that while AI growth is strong, concerns over a potential AI bubble continue to influence investor sentiment.
In a statement on Wednesday, Larry Ellison emphasized caution regarding the fast-evolving AI landscape. “There are going to be a lot of changes in AI technology over the next few years and we must remain agile in response to those changes,” he said.
Oracle Emphasizes “Chip Neutrality”
Ellison also addressed Oracle’s approach to AI hardware, signaling flexibility in sourcing chips. “We will continue to buy the latest GPUs from Nvidia, but we need to be prepared and able to deploy whatever chips our customers want to buy,” he declared, calling the strategy “chip neutrality.”
The policy underscores Oracle’s goal to meet client demand while avoiding reliance on a single supplier, even as Nvidia dominates the AI chip market.
Investor Scrutiny and Debt Concerns
The quarterly results come amid increased investor scrutiny over Oracle’s AI initiatives and data center expansion. Analysts note that some AI infrastructure arrangements involve what could be seen as “circular financing,” where companies finance the purchase of their own products and services.
Jacob Bourne, an analyst at Emarketer, explained: “Oracle’s earnings arrive as investors weigh whether its massive OpenAI partnership might mean overexposure with a customer currently in the spotlight over profitability concerns.” Bourne also highlighted the growing debt load Oracle has taken on to fund new data centers, including a record $18 billion bond sale in September, one of the largest in tech sector history.
Market Reactions: Mixed Perspectives
Opinions on Oracle’s quarterly results remain divided. Colleen McHugh, a consultant for investment platform Wealthify, suggested that the share price reaction reflects broader concerns over tech stock valuations and the AI bubble. She said:
“Many of these tech stocks are priced for absolute perfection, and when there’s a revenue miss — which was a small revenue miss by Oracle yesterday — they do get penalised.”
Others, however, viewed the results positively. Cory Johnson, chief market strategist at Epistrophy Capital Research, called the quarter strong, noting that Oracle’s 14% revenue growth is accelerating. Including the OpenAI deal, Johnson pointed out that Oracle has signed $385 billion in contracts over six months, including clients like Meta and Nvidia.
“But AI sentiment is so bad right now, that’s seen as a bad thing for Oracle,” he added, highlighting the contrast between fundamentals and market perception.
Technical Growth and Strategic Outlook
Despite investor caution, Oracle continues to expand its AI footprint. The growth of OCI services and major contract wins signal that Oracle remains a key player in AI infrastructure, supporting multiple AI technology developers. Analysts suggest that the company’s focus on flexible chip sourcing, cloud infrastructure, and high-profile partnerships may position it to adapt to the rapidly evolving AI sector.
Ellison’s cautious remarks indicate that Oracle anticipates significant shifts in AI technology over the coming years, emphasizing the importance of agility in both software and hardware deployment.
