Oracle forecasts miss Wall Street targets while spending rises

Shares of the Austin, Texas-based company slumped 10 percent in extended trading.

Oracle has leapt to renewed prominence with grand plans to build AI cloud data centers, and its results are viewed as a sign of whether there is an AI bubble and how it will raise money to build that infrastructure.

Oracle said that adjusted profit for the current fiscal third quarter would be $1.64 to $1.68 per share, below analyst estimates of $1.72 per share, according to LSEG data. Oracle’s third-quarter revenue growth forecast of between 16 percent and 18 percent also missed analyst estimates of 19.4-percent growth to $16.87 billion, according to LSEG data, and Oracle’s entire forecast range of cloud sales growth also missed LSEG estimates of $8.87 billion.

At the same time, Oracle executives said that capital expenditures for fiscal 2026 are now expected to be $15 billion higher than the $35-billion figure the company estimated in September during its first-quarter earnings call.

“The ramp in capex and unclear debt needs are causing uncertainty among investors,” said Melissa Otto, head of research at S&P Global’s Visible Alpha.

For the just-ended fiscal second quarter, Oracle reported total revenue of $16.06 billion, compared with analysts’ average estimate of $16.21 billion, according to data compiled by LSEG.

Adjusted operating income of $6.7 billion also missed Wall Street’s average target of $6.8 billion, according to LSEG data.

“Although Oracle’s shares are buoyed by its September surge, this revenue miss will likely exacerbate concerns among already cautious investors about its OpenAI deal and its aggressive AI spending,” eMarketer analyst Jacob Bourne said in a statement.

Oracle reported $523 billion in future contracts, up 14.94 percent from the $455 billion it reported in September, when it revealed a slew of cloud-computing deals with ChatGPT creator OpenAI and others that sent its shares skyrocketing. But the $523-billion figure fell below analyst estimates of $526 billion, according to Visible Alpha data.

On a conference call with analysts, Chief Executive Officer Clay Magouyrk fielded questions on how Oracle would finance building the data centers needed for its cloud contracts.

“We have some other interesting models that we’ve been working on,” he said. “One of them is that customers can actually bring their own chips, and in those models, Oracle obviously doesn’t have to incur any capital expenditures upfront for that model.”

Oracle posted fiscal second-quarter adjusted profit of $2.26 per share, above analyst estimates of $1.64, according to LSEG data. However, Oracle said both adjusted and unadjusted profits were higher on a one-time $2.7-billion pretax gain on selling its stake in chip designer Ampere Computing.

Larry Ellison, Oracle chairman, said the firm chose to sell its shares in Ampere because it plans to have a policy of neutrality about which chips it uses in its data centers and that “we no longer think it is strategic for us to continue designing, manufacturing and using our own chips in our cloud datacenters.”

Ellison said that Oracle would continue to buy Nvidia’s latest chips, but that “we need to be prepared and able to deploy whatever chips our customers want to buy.”

Shares of Nvidia and Broadcom were both down less than 1 percent after Oracle’s results. — Reuters