4 Oracle Analysts Dive Into Q2 Print: Why Last Quarter's Revenue Drag Persisted

Shares of Oracle Corp ORCL tanked in early trading on Tuesday, after the company reported disappointing second-quarter sales.

The results came amid an exciting earnings season. Here are some key analyst takeaways from the earnings release.

• Piper Sandler analyst Brent Bracelin maintained an Overweight rating, while reducing the price target from $130 to $125.
• Wolfe Research analysts reiterated an Outperform rating, while slashing the price target from $140 to $130.
• BofA Securities analyst Brad Sills reaffirmed a Neutral rating, while reducing the price target from $132 to $122.
• William Blair analyst Sebastien Naji maintained a Market Perform rating on the stock.

Check out other analyst stock ratings.

Piper Sandler: Oracle’s November revenue of $12.9 billion came in “below our $13.0B estimate with 4% ex-FX growth within guidance of 3-5%,” Bracelin wrote in a note. “The Cerner revenue drag witnessed last quarter persisted but was exacerbated by FX and slowing Oracle IaaS that moderated to 50% y/y ex-FX (vs. 64% last quarter)."

“We remain encouraged by tight operating controls that drove a rebound in the operating margin back to 43% (vs. 41% last quarter),” the analyst added.

Wolfe Research: Although Oracle’s total revenues, operating margins, and earnings were “solid,” the all-importance IaaS “was again light as demand outstripped supply,” analysts said. Management indicated strength in Cloud bookings and the ability to growth IaaS by more than 50% for the next few years, they added.

Wolfe remains "positively biased as [ORCL] management is not taking any of its prior targets off the table, guiding to accelerating organic cloud growth next quarter, as capacity continues to ramp while underlying demand trends remain unchanged and GPU availability is NOT limiting ORCL’s DC build-out."

BofA Securities: Cloud revenue growth came in below expectations, which “raises some concern, in an environment where other cloud vendors are exceeding,” Sills said. “Oracle’s SaaS business is reliant on existing customer migrations as opposed to new application growth."

“IaaS growth decelerated 14% points sequentially to 50% on an easier comparison, impacted by supply chain constraints on datacenter/GPU capacity,” the analyst further stated.

William Blair: Oracle’s second-quarter results and third-quarter guidance were broadly in-line with expectations, Naji said. “Notably, Cerner is serving as a two-percentage-point headwind to growth in the third quarter,” he added.

“Meanwhile, management noted it expects roughly $8 billion in capex this year, requiring a substantial uptick in the second half and continuing into fiscal 2025,” the analyst stated

ORCL Price Action: Shares of Oracle had tumbled 10.42% to $103.09 at the time of publication on Tuesday.

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