Oracle(US:ORCL) Jin Rong Jie·2025-12-11 06:05Core Viewpoint - Oracle's latest quarterly earnings report has disappointed investors, leading to a significant drop in stock price, reflecting concerns over performance and AI bubble fears [1] Financial Performance - For Q2 of fiscal year 2026, Oracle reported total revenue of $16.1 billion, a year-over-year increase of 14% in USD terms and 13% in constant currency, falling short of analyst expectations [2] - Cloud business, a core part of Oracle's AI transformation, generated combined revenue of $8 billion, with IaaS and SaaS revenues growing 34% year-over-year, but slightly below the expected $8.04 billion [2] - IaaS revenue reached $4.1 billion, up 68% year-over-year, while SaaS revenue was $3.9 billion, growing 11% year-over-year [2] - Software revenue declined by 3% year-over-year to $5.9 billion, while hardware and service revenues showed single-digit growth [2] Profitability and Guidance - Oracle achieved a non-GAAP net profit of $6.6 billion, a 57% increase in USD terms, with non-GAAP earnings per share at $2.26, up 54% [3] - The company provided positive guidance for Q3, expecting total revenue growth of 16%-18% in constant currency and 19%-21% in USD terms, with cloud revenue growth projected at 37%-41% [3] Remaining Performance Obligations and Capital Expenditure - Remaining Performance Obligations (RPO) increased by $68 billion to $523 billion, a year-over-year surge of 438%, driven by new contracts with companies like Meta and Nvidia [4] - Free cash flow for Q2 was -$10 billion, raising investor concerns, while capital expenditures reached $12 billion, significantly exceeding the previous quarter's $8.5 billion [5] Investment Focus and Market Reaction - Oracle's capital expenditures are primarily directed towards data center equipment, with executives emphasizing the quick conversion of spending into revenue [6] - Despite the positive outlook on RPO monetization, the market reacted negatively to the increased capital spending, reflecting skepticism about potential debt and spending issues related to AI infrastructure [7]