Oracle, a US tech giant, saw its stock price fall after the market closed on Wednesday, Eastern Time. The stock price plummeted by more than 10%, closing at $199.94 at the time of writing. This followed the company's release of mixed second-quarter results.
Oracle 's stock price has experienced rollercoaster-like volatility in recent months as investors have reacted to its massive investments in advancing artificial intelligence. The risks and rewards of the project are hotly debated.
Despite the impressive figures in this latest financial report, its performance in the data center sector ... Expenditure on other equipment has increased significantly, and the large backlog of contracts is causing increasing concern among investors. Oracle may become increasingly mired in debt in order to meet market demand.
Cloud infrastructure revenue is growing faster.
Oracle's financial report shows that in the second fiscal quarter ending in November,
The company reported quarterly adjusted earnings per share of $2.26, a 54% increase year-over-year, exceeding analysts’ previous forecast of $1.64 in a FactSet survey.
Revenue grew 14% year-over-year to $16.1 billion, slightly below analysts’ expectations of $16.2 billion.
Oracle's cloud infrastructure (OCI) revenue, which is of most interest to investors, grew 68% to $4.1 billion , with the growth rate accelerating further than in previous months: in the first fiscal quarter ending in August and the fourth fiscal quarter ending in May, Oracle's cloud infrastructure revenue grew by 55% and 52% year-over-year, respectively.
This indicates that Oracle's cloud infrastructure is rapidly emerging as a leader among Amazon cloud providers. , Microsoft A formidable challenger to major competitors like Google's parent company Alphabet, Oracle is poised to further grow into a leading player in the field of artificial intelligence .
Contract backlog further increased
Another data point that investors are most concerned about is Oracle’s Remaining Performance Obligations (RPO, i.e., unconfirmed contract revenue).
Oracle reported that its second-quarter RPO increased by 438% year-over-year to $523 billion, far exceeding the consensus estimate of $502 billion from FactSet analysts, and representing a further 15% increase on top of the huge RPO in the previous quarter.
Oracle CFO Doug Kelling stated in a press release that this growth was driven by Meta and Nvidia. Driven by new commitments from other customers.
Previously, Oracle announced its quarterly results ending in August, showing that its remaining compliance obligations increased by 359% to $455 billion. This news boosted Oracle's stock price, which surged in September. However, since October of last year, market concerns have grown regarding the high costs Oracle would incur to meet these demands, as well as the company's over-reliance on OpenAI as a major customer, leading to a continuous decline in Oracle's stock price.
Therefore, despite the strong demand for Oracle's business shown in this financial report, the high RPO figure failed to dispel investors' biggest concern: how much will Oracle have to pay to meet such huge market demand?
In recent months, Oracle has been deeply embroiled in widespread concerns about an artificial intelligence bubble, as investors grow increasingly worried that the company will sink deeper into debt in order to fulfill massive contracts and fund its data center projects.
According to the Intercontinental Exchange According to ICE data, Oracle's five-year credit default swaps (CDS) climbed to their highest level since 2009 earlier this month.
(Article source: CLS)
