Oracle Q1 cloud revenue growth slows to 30%, Q2 guidance falls short of expectations, stock price drops over 9% after hours.

According to Dolphin Research APP, Oracle (ORCL.US) announced its performance for the first quarter of the 2024 fiscal year on Tuesday morning Beijing time. The data shows that the company's Q1 revenue was $12.5 billion, a YoY increase of 9%, in line with market expectations. The earnings per share, excluding certain items, were $1.19, compared to the market expectation of $1.15.

The highly anticipated cloud revenue reached $4.6 billion, a YoY increase of 30%, lower than the 54% growth rate in the previous quarter. Among them, cloud infrastructure revenue was $1.5 billion, a growth of 66%; cloud application revenue was $3.1 billion, a growth of 17%.

The revenue growth of Fusion software, used for enterprise financial management, was 21%, compared to a growth rate of 26% in the previous quarter. The revenue of NetSuite, an enterprise planning tool for small and medium-sized enterprises, increased by 21%, while the growth rate in the previous quarter was 22%.

Oracle is well-known for its database software and is currently focusing on expanding its cloud infrastructure business to compete more effectively with Amazon, Microsoft, and Google. Investors are increasingly hopeful that the surge in demand for artificial intelligence (AI) products will help Oracle expand its market share.

CFRA analyst Angelo Zino said that for Oracle, "the most important thing is cloud computing and expanding the business."

Oracle Chairman Larry Ellison expressed enthusiasm for the AI boom. He stated that AI development companies have signed cloud capacity contracts worth over $4 billion, which is double the figure from the previous quarter.

Oracle CEO Safra Catz stated that cloud infrastructure revenue in the first quarter increased by 66%, "much faster than our hyperscale cloud infrastructure competitors." This figure was 76% in the first three months.

Catz said in a conference call after the earnings report that the company's biggest challenge at the moment is to establish data centers quickly to meet demand. As interest in emerging technologies soars, there has been a constant shortage of powerful chips required for running AI workflows.

Catz stated that revenue for the second quarter ending in November will grow by 5% to 7%. The average analyst expectation is an 8% growth to $13.3 billion. Catz also mentioned that cloud revenue, excluding the Cerner healthcare division, will grow by 31%.

Catz stated that as Oracle migrates customers to cloud computing, the Cerner healthcare division will face "short-term headwinds." She added that they are working to improve profitability to "Oracle standards." Earlier this year, Oracle downsized the Cerner division, which was acquired in June 2022.

At the time of writing, Oracle's stock fell 9.05% after hours, to $115.24. The stock has risen nearly 57% this year.