Oracle (ORCL) Q2 earnings report 2024

Oracle shares dropped more than 9% in extended trading Monday after the software company reported fiscal second-quarter revenue and quarterly revenue guidance that fell short of Wall Street expectations.

Here’s how the company did, compared with consensus estimates from LSEG, formerly known as Refinitiv:

• Earnings per share: $1.34 per share, adjusted, vs. $1.32 per share, expected
• Revenue: $12.94 billion, vs. $13.05 billion expected

Revenue grew 5% year over year in the quarter, which ended Nov. 30, according to a statement. Net income increased 44% to $2.5 billion, or 89 cents per share, from $1.74 billion, or 63 cents a share, a year ago.

With respect to guidance, Oracle called for adjusted net income for the fiscal third quarter of $1.35 to $1.39 per share and 6% to 8% revenue growth. Analysts polled by LSEG had predicted $1.37 in adjusted earnings per share and $13.34 billion in revenue, which implies 7.6% revenue growth.

Oracle’s revenue from cloud services and license support totaled $9.64 billion, up 12% and below the StreetAccount consensus of $9.71 billion.

Revenue from cloud and on-premises licenses fell 18% to $1.18 billion, slightly lower than the $1.21 billion StreetAccount consensus.

Services revenue, at $1.37 billion, also missed consensus, which was $1.40 billion.

Oracle said cloud infrastructure revenue reached $1.6 billion during the period, up 52%. Clients included Elon Musk’s artificial intelligence startup xAI, Halliburton and Samsung.

The Musk company wanted considerably more AI chips than Oracle could supply, Oracle co-founder Larry Ellison said on a conference call with analysts. Nvidia’s graphics processing units have been in short supply across the board, and the chipmaker has been working to address the shortage.

“We did not bring up as much capacity as we could have used this past quarter, Oracle CEO Safra Catz said on the call. The company had to choose between building something small and recognizing revenue in the quarter, or going ahead with a larger buildout and waiting for capacity to become available, she said.

During the quarter, Oracle said it had picked up cloud business from larger rival Microsoft and announced that its database software will be available on Microsoft’s Azure public cloud. The company will turn on 20 data centers connected with Azure in the next few months, Oracle co-founder Larry Ellison said in the statement.

“I expect the OCI growth rate to be over 50% for a few years,” Ellison said on the conference call. OCI is the Oracle Cloud Infrastructure, the company’s answer to Microsoft Azure and the market-leading Amazon Web Services.

Also in the quarter, Oracle’s NetSuite division bought Australian company Next Technik, which makes field service software, for undisclosed terms.

Oracle shares are up about 41% so far this year, outperforming the S&P 500 index, which has gained 20% during the same period.

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