Oracle stock is down almost 8% after earnings miss and elevated cloud expectations

• Oracle's stock fell nearly 8% after missing earnings estimates and issuing weaker guidance.
• Oracle's cloud services, driven by AI demand, grew 12% in the last quarter, making up 77% of revenue.
• Oracle's stock surged 80% this year, boosting its market value to over $500 billion.

Oracle fell nearly 8% in extended trading after it reported quarterly earnings that slightly missed estimates and the company issued weaker-than-expected guidance.

The software provider reported fiscal second-quarter revenue of $14.1 billion, a 9% year-on-year increase. It reported $4.21 billion in profit, or $1.47 per share, for the three months that ended in late November.

Oracle's cloud services business, which has customers including OpenAI, xAI, and Nvidia, grew 12% from last year and made up 77% of the company's total quarterly revenue.

Oracle said it expects revenue growth between 7% and 9% for the current quarter. This would bring revenue expectations to about $14.3 billion, below analyst estimates of $14.65 billion.

The company's business is booming due to sky-high demand for computing from artificial intelligence companies seeking to train their models. Oracle's stock has surged 80% this year, boosting its market value from below $165 billion in late 2022 to north of $500 billion.

The enterprise-computing giant's stock decline on Monday resulted from high expectations going into the results.

Fiscal second-quarter expectations are elevated coming out of a bullish September analyst day and long-term revenue targets that imply a multi-year growth acceleration, Jefferies analyst Brent Thill wrote in a note last week.

At the analyst day in September, Oracle forecasted annual revenue to rise to at least $104 billion in fiscal year 2029, a sign of its continued growth in cloud infrastructure.

Investors are likely also reacting to mixed results. Key metrics include capital expenditure, which was above consensus; growth of infrastructure-as-a-service, which was in line with consensus; and growth of backlog, an Oracle product, which missed estimates.

Oracle competes with Google, Amazon Web Services, and Microsoft in the cloud infrastructure business.

"Our cloud is faster and is less expensive than other clouds," Oracle's CEO Safra Catz said on an earnings call on Monday. "We remain the preferred cloud for AI workloads."

On Monday, the company also announced a deal with Meta to use Oracle's AI cloud infrastructure to develop the social media giant's Llama AI models.

Oracle's soaring stock price this year has boosted the net worth of Larry Ellison, who cofounded the company and is chief technology officer. His Oracle stock — he holds more than 40% of the company's shares — puts him third on the Forbes Real-Time Billionaires list, worth $234.8 billion as of Monday.