Oracle misses expectations and guidance was also weak, sending its stock lower

Shares of the database and business software giant Oracle Corp. headed lower in extended trading today after it missed analysts’ expectations for its latest financial results.

The company did reiterate its bullish stance on artificial intelligence and the prospects for its cloud infrastructure segment, but that wasn’t enough to convince investors in another down day for the broader markets.

Oracle reported fiscal 2025 third-quarter earnings before certain costs such as stock compensation of $1.47 per share, trailing the $1.49-per-share forecast. Revenue for the period also came up short, up 6% from a year ago, to $14.13 billion, but below the analyst target of $14.39 billion. Net income jumped 22%, to $2.94 billion, or 85 cents per share after being adjusted for certain costs.

The company’s all-important cloud services and license support business grew the fastest, with revenue there rising 10% from the same period one year earlier to $11.01 billion, accounting for 78% of its total sales. However, that also came in below estimates, with the Street looking for sales of $11.21 billion.

Oracle’s cloud infrastructure segment has been booming in recent quarters, giving companies another alternative to shift enterprise workloads from their on-premises data centers. Customers have been rushing to the cloud primarily to support their generative AI projects, with Oracle offering access to thousands of graphics processing units from Nvidia Corp. The segment continued to grow at a rapid pace, with revenue there up 49% from a year ago, to $2.7 billion.

In a statement, Oracle Chairman Larry Ellison told analysts that the company is seeing record levels of customer demand in cloud infrastructure. “We are on schedule to double our data center capacity this calendar year,” he added, saying that’s necessary to meet demand.

According to Ellison, customers are especially interested in the company’s new Oracle AI Data Platform, which allows them to use leading AI models such as OpenAI’s GPT family, xAI Corp.’s Grok and Meta Platforms Inc.’s Llama family on their own data in a secure way.

Oracle’s other major business unit, cloud and on-premises, added $1.1 billion in revenue, down 10% from a year earlier. The company’s remaining performance obligations, which refers to contracted revenue not yet recognized, jumped 62% during the quarter, to $130 billion, outpacing the Street’s estimate of $103.3 billion.

Oracle Chief Executive Safra Catz (pictured) said the RPO bodes extremely well for the future, and she said she expects it to “continue to grow rapidly, as we look forward to signing our first Stargate contract.”

The Stargate Project was announced by Oracle and partners including OpenAI and SoftBank Group Corp. alongside U.S. President Donald Trump in January. It pledged to invest as much as $500 billion into AI infrastructure in the country over the next four years.

According to Catz, Oracle’s investments in Stargate and its own initiatives mean that its capital expenditures in fiscal 2025 will be “a little more than double” what the company spent in the last year, at aboout $16 billion. That’s different from three months ago, when Catz said capex was likely to be “double” the previous year.

“We remain careful to pace and align our capex investments appropriately and in line with booking trends,” she told analysts.

Analyst Rebecca Wettemann of Valoir told SiliconANGLE that investors are still nervous about cloud infrastructure providers overspending and overbuilding to support future AI workloads. They’re nervous that these workloads either won’t materialize, or will be less cost-effective than expected given the rise of lower-cost AI models such as DeepSeek Ltd.’s R1.

“It’s hard to plan a year ahead for data center capacity when AI and the supporting infrastructure are evolving so rapidly, especially if we’re talking about global businesses that need to rethink their overall strategies because of changes in tariffs and supply chain exposure,” Wettemann said.

Holger Muller of Constellation Research Inc. said Catz’s claims of being careful to pace the company’s capex investments contrast with the reality that it’s now investing 75% of its cash flow into data center building, whereas traditionally it only ever spent 50%.

“The new fiscal year will be key for the company to show that its doubling of Oracle Cloud Infrastructure capacity can be monetized,” Mueller said. “AI workloads will likely be a growth engine, but customers can be very fickle.

On the plus side, Catz announced that the company signed major cloud agreements with the likes of OpenAI, Nvidia and Meta during the quarter, which should help boost its overall revenue by 15% in the next fiscal year.

As for guidance, Oracle said it’s expecting revenue growth of between 8% and 9% in the current quarter, trailing Wall Street’s forecast of $15.91 billion, which would represent around 11% growth. The company is also targeting earnings of between $1.61 to $1.65 per share, well below the Street’s target of $1.79 per share.

Investors were less than impressed with what they saw, and Oracle’s stock dipped 4% in extended trading. That came after it fell 4% during the regular trading session, one of the worst days on Wall Street in years. Investors have been behaving much more cautiously lately, selling previously strong-performing technology stocks amid ongoing economic uncertainty. They have major concerns about Trump’s trade policies, and what tariffs could mean for many tech firms.

“Oracle had three things going against it today,” Wettemann said. “There’s general skepticism about AI valuations, general economic uncertainty and market skittishness, and the lower-than-expected revenue number.”

That said, Wettemann pointed out that Oracle isn’t as vulnerable as its cloud rivals are to the AI and cost pressures because it runs its own infrastructure and models and embeds these directly into its core applications, instead of selling them as a pricey add-on.

“This keeps Oracle insulated from rising compute costs and lowers adoption barriers for customers already using its software,” she said.

Photo: Oracle PR/Flickr