Oracle Shares Fall 8% as Growth Slows in Cloud Computing

Oracle’s shares fell about 8% in extended trading Monday (Dec. 11) after the firm reported disappointing sales growth in its cloud computing business.

The company’s announcement raised concerns among investors about its ability to keep up in the highly competitive cloud computing market, Bloomberg reported Monday (Dec. 11).

In the period ended Nov. 30, Oracle’s cloud revenue increased by 25% to $4.8 billion, compared to a 30% gain in the previous quarter, according to the report. This marks the second consecutive quarter of slowing growth for the company.

Oracle has been striving to expand its cloud infrastructure business to better compete with industry giants like Amazon, Microsoft and Alphabet’s Google, the report said.

However, the company faced a setback last quarter when it reported a slowdown in infrastructure growth after more than a year of acceleration, per the report.

Oracle’s infrastructure growth fell below analysts’ expectations, according to the report. In the quarter, the growth rate was 52%, down from 66% in the previous period.

Despite the disappointing sales growth, Oracle executives remain optimistic about the business, the report said. CEO Safra Catz stated that demand for Oracle’s cloud services is increasing at an “astronomical rate.” Chairman Larry Ellison also expressed confidence, mentioning that the company continues to invest in expanding its cloud infrastructure, including building 100 new cloud data centers.

The future growth of Oracle’s cloud business will not only depend on customer demand but also on the availability of graphics processors used in data centers for powering artificial intelligence (AI) workloads, per the report. Analyst Siti Panigrahi from Mizuho highlighted this as a crucial factor in determining future gains.

Despite the stock’s drop in extended trading on Monday, the stock has still gained 41% this year, according to the report. Still, that lags behind the iShares Expanded Tech-Software Sector ETF rally of 55%.

It was reported in November that cloud computing giants Google, Amazon and Microsoft upped their capital spending to a combined $42 billion for the three months up to September.

Executives from those tech giants have said that large amounts of capital budget are being earmarked for generative AI systems that need vast amounts of computing and data power.