(Reuters) – Oracle on Monday estimated current-quarter revenue below Wall Street targets and missed expectations for the first quarter as a strong economy suppressed cloud spending by businesses, sending its shares down 9% in extended trading.
Businesses are rethinking their digitization plans after demand for the cloud surged during the pandemic, hurting Oracle’s hold in a segment dominated by big rivals like Amazon Web Services and Microsoft.
Still, analysts say the adoption of artificial intelligence (AI) applications could boost Oracle’s cloud infrastructure business as advances in networking technology make it better suited to handling AI workloads.
“As of today, AI development companies have signed contracts to purchase more than $4 billion of capacity in Oracle’s Gen2 Cloud. This is twice as much as we booked at the end of Q4,” said Oracle Chairman and CTO Larry Ellison.
Ellison, a self-proclaimed close friend of Elon Musk, announced that the Tesla CEO’s AI startup xAI has signed a contract to train AI models in the Oracle Gen2 Cloud.
He also said that all nine utility companies owned by Berkshire Hathaway will replace their existing enterprise resource planning systems with Oracle Fusion Cloud applications.
Oracle shares have gained about 55% this year.
The company estimated second-quarter revenue growth between 5% and 7%, lower than analysts’ average estimate of 8.2%, according to LSEG data. It expects adjusted earnings between $1.33 and $1.34.
First-quarter revenue came in at $12.45 billion, slightly below estimates of $12.47 billion.
Excluding items, it earned $1.19 per share, compared with estimates of $1.15.
(Reporting by Akash Sriram in Bengaluru; Editing by Devika Syamnath)
