4 Oracle Analysts Dive Into Q2 Print: Why Last Quarter’s Revenue Drag Persisted – Oracle (NYSE:ORCL)

Shares of Oracle Corp (ORCL) saw a significant drop in early trading on Tuesday after the company reported disappointing second-quarter sales. The results came during an exciting earnings season, and analysts have offered their takeaways from the earnings release.

Piper Sandler analyst Brent Bracelin maintained an Overweight rating on the stock but reduced the price target from $130 to $125. Wolfe Research analysts reiterated an Outperform rating but slashed the price target from $140 to $130. BofA Securities analyst Brad Sills reaffirmed a Neutral rating and reduced the price target from $132 to $122. William Blair analyst Sebastien Naji maintained a Market Perform rating on the stock.

According to Piper Sandler, Oracle’s November revenue of $12.9 billion fell below their $13.0 billion estimate with 4% ex-FX growth within the guidance of 3-5%. The revenue drag from Cerner persisted and was exacerbated by foreign exchange and slowing Oracle IaaS. However, the analyst noted that the company’s tight operating controls drove a rebound in the operating margin back to 43%.

Wolfe Research acknowledged that Oracle’s total revenues, operating margins, and earnings were solid, but the IaaS segment was light due to supply constraints. The management indicated strength in Cloud bookings and the ability to grow IaaS by more than 50% for the next few years. Wolfe Research remains positively biased as Oracle’s management is not revising their prior targets and expects accelerating organic cloud growth in the next quarter.

BofA Securities expressed concern over Oracle’s cloud revenue growth, which fell below expectations compared to other cloud vendors. The analyst noted that Oracle’s SaaS business relies on existing customer migrations rather than new application growth. Additionally, IaaS growth decelerated due to supply chain constraints on data center and GPU capacity.

William Blair stated that Oracle’s second-quarter results and third-quarter guidance were in line with expectations. However, the company mentioned that its partnership with Cerner would serve as a two-percentage-point headwind to growth in the third quarter. Management also expects a substantial uptick in capital expenditures this year, requiring continued investment in the second half and into fiscal 2025.

As a result of the disappointing sales report, Oracle’s stock price dropped by 10.42% to $103.09 at the time of publication on Tuesday.

It is important to note that stock prices can be highly volatile, and investors should conduct thorough research and consult with financial professionals before making any investment decisions.