Why Is Oracle (ORCL) Down 8.8% Since Last Earnings Report?

Earnings Performance - Oracle reported Q2 fiscal 2025 non-GAAP earnings of $1.47 per share, missing the Zacks Consensus Estimate by 0.68% but increasing 9.7% year over year [2] - Revenues rose 9% year over year to$ 14.1 billion, driven by Oracle Cloud Infrastructure (OCI) business, but missed the Zacks Consensus Estimate by 0.46% [3] - Shares lost about 7% in extended trading after closing at $190.45 [3] Revenue Breakdown - Cloud services and license support revenues increased 12% year over year to$ 10.8 billion, driven by strategic cloud applications, autonomous database, and OCI [6] - Total cloud revenues (SaaS plus IaaS) were up 24% to $5.9 billion, with Cloud Infrastructure (IaaS) revenues up 52% to$ 2.4 billion and Cloud Application (SaaS) revenues up 10% to $3.5 billion [7] - Fusion Cloud ERP (SaaS) revenues increased 18% to$ 0.9 billion, while NetSuite Cloud ERP (SaaS) revenues increased 20% to $0.9 billion [8] - Hardware revenues decreased 4% to$ 728 million, and services revenues decreased 3% to $1.33 billion [8] Geographic Revenue - Revenues from the Americas increased 10.7% year over year to$ 8.93 billion, accounting for 63.5% of total revenues [5] - Europe/Middle East/Africa revenues climbed 6.7% year over year to $3.38 billion, contributing 24% of total revenues [5] - Asia Pacific revenues increased 0.2% year over year to$ 1.7 billion [5] Cloud Infrastructure and AI Demand - Oracle Cloud Infrastructure revenues increased 52% year over year, driven by record-level AI demand [11] - GPU consumption was up 336% in the quarter, and Oracle delivered the world's largest and fastest AI supercomputer, scaling up to 65,000 Nvidia H200 GPUs [12] - OCI consumption revenues were up 58% as demand continued to outstrip supply [11] Operating Performance - Non-GAAP total operating expenses increased 8% year over year to $7.96 billion [13] - Non-GAAP operating income was$ 6.09 billion, up 10% year over year, with a non-GAAP operating margin of 43%, expanding 58 basis points year over year [13] Balance Sheet and Cash Flow - As of Nov 30, 2024, Oracle had cash & cash equivalents and marketable securities of $11.3 billion, compared to$ 10.9 billion as of Aug 31, 2024 [14] - Operating cash flow and free cash flow amounted to $20.2 billion and$ 9.54 billion, respectively [14] Remaining Performance Obligations (RPO) - The company's RPO is more than $97.3 billion, up 50% at constant currency, with cloud RPO growing more than 80% and representing nearly three-fourths of total RPO [15] - Approximately 39% of total RPO is expected to be recognized as revenues over the next 12 months [15] Share Repurchase and Dividend - The company purchased 1 million shares for a total of$ 150 million [16] - The board declared a quarterly cash dividend of 40 cents per share of outstanding common stock [16] Guidance - For Q2 fiscal 2025, total revenues are expected to grow 9-11% in constant currency and 7-9% in USD, with total cloud revenues expected to grow 25-27% in constant currency and 23-25% in USD [17] - Non-GAAP EPS is expected to grow 7-9% in constant currency and 4-6% in USD [17] - The company expects cloud revenues to reach $25 billion in fiscal 2025 [18] Market Sentiment and Estimates - In the past month, investors have witnessed a downward trend in estimates revision, with the consensus estimate shifting -5.76% [19] - Oracle has a Zacks Rank 3 (Hold), and estimates have been broadly trending downward, indicating a downward shift [22]