Oracle (NYSE:ORCL) stock took a beating today [December10, 2024], dropping nearly 7% in what’s shaping up to be its worst single-day tumble in almost a year.
The culprit?
A fiscal Q2 earnings report that came in just below Wall Street’s lofty expectations of $14.06 billion in revenue versus $14.1 billion anticipated, and $1.47 adjusted EPS falling shy of the $1.48 forecast.
Larry Ellison, Oracle’s co-founder and chairman, wasn’t spared the fallout either.
His net worth nosedived by $15 billion to $203 billion, thanks to his hefty 42% stake in the company.
But here’s the kicker: Oracle’s cloud business keeps flexing, pulling in $10.81 billion in revenue, up 12% year-over-year and now making up a whopping 77% of the company’s total.
So, why the panic?
Oracle’s cloud transition story isn’t sprinting the way some hoped.
Legacy business, still 60% of operations, is dragging, and analysts flagged a steep rise in capital expenditures, set to hit 25% of revenue this year, as Oracle races to build out AI-focused infrastructure.
Meanwhile, whispers of a potential TikTok ban in the U.S. add another wrinkle, with analysts warning that Oracle could take a solid hit if its lucrative partnership with ByteDance’s video platform gets yanked.
Even so, analysts like D.A. Davidson see Oracle’s cloud investments as a long-term play, calling out AI demand as a potential game-changer.
And here’s why investors might want to take a second look: Despite the earnings miss, Oracle’s growth trajectory in cloud infrastructure remains a bright spot, with analysts staying optimistic.
In fact, many analysts raised their price targets, citing Oracle’s partnerships with tech heavyweights like Google (NASDAQ:GOOG), Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), and Meta (NASDAQ:META) as proof that its AI momentum is no fluke.
For anyone willing to ride out the current volatility, today’s pullback could be a golden ticket to get in on the ground floor of Oracle’s next big move.
[gurufocus.com]
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