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When a stock misses Wall Street’s earnings expectations, the Street’s vengeance is usually swift and brutal. But today must be opposite day: Although shareholders are punishing Oracle after its latest earnings results came in lower than expected, Wall Street is in a forgiving mood.
Here’s what the software powerhouse and AI darling reported for its second quarter:
- Adjusted earnings per share of $1.47 missed Wall Street’s forecast of $1.48 by a hair.
- Revenue of $14.06 billion came in just under expectations of $14.1 billion.
- Forecasts for next quarter of $14.3 billion in revenue and EPS of $1.50 to $1.54 were below Wall Street’s predictions of $14.66 billion in revenue and EPS $1.57.
At first glance, those numbers don’t look great—near misses on the top and bottom lines, sure, but still misses. Shares sank 6.67% today as shareholders vented their frustrations on the stock for not growing as quickly as they’d like.
But let’s be clear: Oracle’s doing just fine.
A cloudy future
Oracle has surged over 70% in 2024 (including today’s decline) thanks largely to its role providing cloud infrastructure like datacenters and servers to major AI players. More demand for AI means more demand for services like Oracle’s, and that has meant more money: Oracle’s Cloud Infrastructure unit reported a 52% increase in revenue year over year this quarter, and a new deal with Meta Platforms has secured future revenue streams.
That’s likely a key reason behind Wall Street’s indulgence today. Usually when a stock misses expectations, the pros will lower their ratings and adjust their price targets for the company. A few didn’t like Oracle’s spending spree: The company spent $4 billion in capital expenditures this quarter in order to continue scaling its operations to meet demand, which took a big bite out of free cash flow.
But none of the major firms covering the stock dropped their ratings or price targets—in fact, Mizuho analyst Siti Panigrahi actually upped his price target from $185 to $210. He cited Oracle’s forecast that its cloud business will grow by 50% next year as a good reason to have faith in the company.
TLDR: While investors demand nothing short of perfection, Wall Street believes today’s short-term pain will give way to long-term gains. Or, in other words: Oracle’s future is bright.—MR