(Reuters) – Oracle (ORCL) shares fell more than 9% on Tuesday after quarterly revenue fell short of Wall Street expectations, and the company’s share price fell more than 9% on Tuesday after quarterly revenue fell short of Wall Street expectations, undermining intense market pressure in its cloud business amid soaring demand from AI service providers. It showed investors’ concerns about competition.
The company traded at $172.78 a share, with its market capitalization expected to fall by nearly $50 billion if the losses continued.
Oracle’s stock has soared more than 80% this year through Monday as investors cheered investments to shore up cloud infrastructure to meet growing demand for artificial intelligence and close the gap with market leaders.
“The rapid backlog build-up appears to be leveling out, with investors’ focus on the income statement and the earnings and sustained double-digit EPS growth that will fuel this demand,” Morgan Stanley analysts said in a note. “It’s likely to shift to Oracle’s ability to change.”
Oracle reported second-quarter revenue of $14.06 billion, up 9% year over year, but below analysts’ average estimate of $14.11 billion, according to data compiled by LSEG.
Investors are betting on AI companies, expecting the technology to be a powerful growth driver in the future.
“Oracle’s cloud infrastructure revenue continues to grow as demand for AI computing grows on the platform,” DA Davidson said in the note.
At least 21 brokerages raised their price targets on the stock, with two raising their estimates to $220.
“We also still believe that previously announced multi-cloud agreements (such as those with Azure and Google Cloud) will contribute to improved margins in our legacy business, which will help offset the impact on OCI. “There is,” the analysts said. Melius Research mentions cloud business.
Oracle’s forward 12-month forward price/earnings ratio is 28.08, compared to 31.86 for Microsoft and 36.66 for Amazon.
(Reporting by Sidharth S and Joel Jose in Bengaluru; Additional reporting by Harshita Mary Varghese; Editing by Vijay Kishore and Sriraj Kaluvila)
