Oracle Tumbles on Earnings Miss, Deutsche Bank Keeps Rating

Oracle Corp.’s (ORCL) shares crashed on Tuesday amid a lackluster fiscal second-quarter earnings report but retained a buy rating from Deutsche Bank AG.

Oracle’s stock shed -12.46% to $100.79 per share on December 12, followed by an additional -0.14% after-hours slide to $100.65. Market analysts cautioned that it might fall below the $100.00 resistance level in the upcoming session.

The US software firm posted a revenue of $12.94 billion for an annualized growth rate of 5.00% in the second quarter. However, the figure fell -0.84% below the market consensus of $13.05 billion.

Conversely, Oracle earnings per share (EPS) rose 11.00% year-over-year to $1.34, beating the LSEG estimate of $1.32 apiece. Net income also increased by 44.00% to $2.50 billion from $1.74 billion in the same quarter a year ago.

Revenue from cloud and on-premises licenses plummeted by -18.00% to $1.18 billion, missing the projection of $1.21 billion. Services revenue stood at $1.37 billion, falling short of the expected $1.40 billion.

Investors focused on the Oracle Cloud Infrastructure (OCI) growth rate, which slowed to 25.00% after topping 30.00% for multiple quarters. Stakeholders considered the OCI growth one of the company’s most critical metrics.

Oracle CEO Safra Catz downplayed the slowdown, emphasizing the Remaining Performance Obligations (RPO) of over $65.00 billion. She added that demand for cloud computing and generative artificial intelligence (GenAI) is booming.

Furthermore, Chief Technology Officer (CTO) Larry Ellison said the company lowered its capacity utilization in the second quarter to facilitate expansion. He noted Oracle’s plans to build 100 new data centers and augment 66 existing ones.

Deutsche Bank Retains Bullish Outlook for Oracle

Deutsche Bank kept its buy rating on Oracle, saying the disappointing quarter is part of its growing pains. The bank’s analysts cited the two $1.00 billion deals recently announced by Ellison and the growing demand for cloud services.

Additionally, the cloud services provider maintained a close relationship with Nvidia Corp. through its massive purchases of AI chips. Nvidia controls approximately 80.00% of the advanced AI chip market, which powers much of the GenAI boom sparked by ChatGPT.

Oracle has also built long-term partnerships with other tech giants, including Microsoft Corp. and its cloud service Azure. Considering such ties, analysts at Deutsche Bank expect the firm to reach 50.00% OCI growth and maintain it for a few years.