Oracle forecasts Q3 revenue below estimates on weak cloud spending, shares fall

Oracle share price, Oracle revenue forcast: Oracle (ORCL.N) forecast quarterly revenue below estimates on Monday, as an uncertain economy and competition in the cloud computing market weighed on demand for its cloud offerings, sending its shares down more than 7 per cent in extended trading.

Sticky inflation and high borrowing costs have forced firms to cut back on expenditure, hurting companies like Oracle that depend on enterprise spending.

In October, Google-parent Alphabet (GOOGL.O) also reported the slowest growth in its cloud division in at least 11 quarters, raising concerns over demand.

A big drag on results might have been from the Cerner business Oracle acquired last year as well as continued sluggish enterprise spending, according to Gil Luria, a research analyst at D.A. Davidson.

For the current quarter, Oracle forecast revenue growth, including Cerner, to be in the range of 6 per cent-8 per cent, the mid point of which is below analysts' average estimate for growth of about 7.6 per cent, according to LSEG data.

Total revenue for the second quarter was up 4 per cent, including Cerner, and up 6 per cent excluding Cerner, CEO Safra Catz said on an earnings call.

Oracle has been working to bolster its AI infrastructure as firms look to adopt generative AI. However, frontrunners Amazon (AMZN.O) and Microsoft (MSFT.O) continue to dominate the market.

Larger players have already made deep inroads in the AI ecosystem, limiting opportunities for Oracle to gain a sizeable market share.

In October, Microsoft beat Wall Street estimates for first-quarter results across all segments, with its AI offerings propelling growth in the cloud computing segment.

Oracle reported second-quarter revenue of $12.94 billion, below analysts' average estimate of $13.05 billion, according to LSEG data.

Its adjusted earnings of $1.34 per share for the quarter ended Nov. 30 narrowly beat estimates.