Oracle skids, but Wall Street comes to defense as cloud growth continues

Oracle (NYSE:ORCL) may have reported fiscal second-quarter results and guidance that were a bit weaker-than-expected, but Wall Street continued to praise the IT giant nonetheless, amid continued growth in the cloud.

Shares were down 6% in premarket trading, while other cloud software stocks were also lower, including Microsoft (MSFT), Adobe (ADBE) and ServiceNow (NOW).

“A fourth consecutive quarter of accelerating [current remaining performance obligations] growth to 20% y/y (vs. 18% last quarter) reinforces our confidence in a multi-quarter growth reacceleration that could evolve into a multi-year acceleration, underpinned by cloud and AI secular tailwinds, particularly as Meta joins companies like xAI, NVIDIA, and Cohere as customers leveraging Oracle’s AI infrastructure,” Piper Sandler analyst Brent Bracelin wrote in a note to clients.

“While the Oracle Cloud momentum was encouraging, consistent expense discipline coupled with improving margins across cloud applications and infrastructure was equally encouraging,” Bracelin added. He raised his price target to $210 from $185 after the results and reiterated his Overweight rating.

Mizuho Securities analyst Siti Panigrahi also raised his price target (to $210 from $185) on Oracle, as he pointed out that the cloud strength is being driven by artificial intelligence.

“Oracle’s broad portfolio of infrastructure and application products, its multi-cloud strategy through hyperscaler partnerships, and unprecedented AI demand position it well to reaccelerate growth,” Panigrahi wrote in a note to clients. “We view the current share weakness as a buying opportunity.”

KeyBanc Capital Markets analyst Jackson Ader noted that while the dip in the stock was the result of some “lofty expectations,” bookings momentum is still on track and acceleration in cloud and software-as-a-service businesses are still expected to expand. “We still like Oracle heading into 2025,” Ader wrote. He has an Overweight rating and $200 price target on the stock.

Looking to the next quarter, Oracle said it expects to earn between $1.50 and $1.54 per share on an adjusted basis (below the $1.57 per share estimate), with revenue growing between 7% and 9% year-over-year, or 9% to 11% in constant currency. It also remains very confident to see double-digit growth in full-year revenue, while cloud infrastructure should see 50% or more growth.