Oracle's earnings fell short of expectations, but the performance guidance is optimistic. After a rise of about 6%, the stock price turned to decline | Earnings Report Insights
Despite performance falling short of expectations, Oracle remains optimistic about the expansion of its AI cloud business. CEO Safra Catz expects revenue growth of 15% for fiscal year 2026, higher than the market expectation of 12.6%. The chairman of Oracle stated that the company is on track to double its data center capacity by the end of this year
Oracle announced its third fiscal quarter results after the U.S. stock market closed on Monday. Despite the company's optimistic outlook for future growth and a significant increase in cloud business bookings, overall revenue and earnings fell short of Wall Street expectations. The stock price initially rose about 6% in after-hours trading but then turned to decline.
Here are the key points from Oracle's Q3 fiscal 2025 earnings report:
1. Key Financial Data
Revenue: Oracle's adjusted revenue for Q3 was $14.13 billion, a year-on-year increase of 6%, below analysts' expectations of $14.39 billion.
Net Profit: Oracle's net profit for Q3 increased by 22% year-on-year, reaching $2.94 billion.
Operating Margin: Oracle's operating margin for Q3 was 44%, higher than analysts' expectations of 43.6%.
Adjusted Operating Profit: Oracle's adjusted operating profit for Q3 was $6.20 billion, below analysts' expectations of $6.25 billion.
Adjusted EPS: Oracle's adjusted EPS for Q3 was $1.47, below analysts' expectations of $1.49.
2. Business Segment Data
Cloud Revenue: Oracle's cloud revenue for Q3 was $6.2 billion, below analysts' expectations of $6.3 billion, growing 25% at constant currency.
Cloud Infrastructure Revenue: Oracle's cloud infrastructure revenue for Q3 was $2.7 billion, a year-on-year increase of 49%, with analysts expecting $2.71 billion.
3. Performance Guidance
Capital Expenditure: Oracle expects capital expenditures for fiscal 2025 to be approximately $16 billion.
Revenue: Oracle expects revenue to grow by about 20% in fiscal 2027.
After initially rising nearly 6% in after-hours trading, Oracle's stock price turned to decline.
AI Demand Drives Cloud Infrastructure Expansion
As a latecomer to the cloud market, Oracle has been accelerating the development of its cloud business to challenge industry giants like Microsoft and Amazon. The main strategy the company has adopted is to integrate AI technology into its cloud services to enhance large-scale information processing capabilities.
To support these data-intensive AI services, Oracle is strategically expanding its infrastructure while investing in data centers and semiconductor technology.
The rapid growth in AI demand has become a significant driver of the company's cloud business, but the performance of cloud revenue and cloud infrastructure revenue this quarter still fell slightly short of expectations.
Although the data did not meet market expectations, the earnings report showed a significant increase in Oracle's cloud business bookings, and Oracle CEO Safra Catz remains optimistic about future growth prospects, expecting the company's revenue to grow by 15% in fiscal 2026, higher than the market's general expectation of 12.6%. He stated:
"We have now signed cloud agreements with several leading global technology companies, including OpenAI, xAI, Meta, NVIDIA, and AMD. We expect that the $130 billion in sales backlog will drive Oracle's overall revenue growth of 15% in the next fiscal year." Larry Ellison, Chairman of Oracle, emphasized in a statement:
“We are on track to double our data center capacity by the end of this year, with customer demand reaching an all-time high.”
It is noteworthy that in January of this year, President Trump announced the construction of AI infrastructure, with Oracle, OpenAI, and SoftBank participating together. The first collaborative project, "Stargate," has begun data center construction in Texas, and Ellison revealed at a White House press conference that the project is underway.
TD Cowen analysts noted in a report last week that Oracle's data center leasing activities "have significantly accelerated in recent months," most of which are for the "Stargate" project, while some are for Oracle's own cloud business.
Bloomberg analyst Anurag Rana wrote in a report prior to the earnings release: "Strong demand for generative AI cloud infrastructure and collaboration with the three major cloud superpowers could elevate Oracle to the position of the fourth-largest cloud service provider."