Oracle Corp.’s impressive rate of cloud revenue growth wasn’t enough to offset declines elsewhere in its business, and its stock was headed lower in late trading after the company missed Wall Street’s earnings and sales targets.

The database company reported fiscal 2025 second quarter earnings before certain costs such as stock compensation of $1.47 per share, falling just shy of the $1.48 analyst consensus estimate. Revenue for the period rose 9% from a year earlier to $14.06 billion, below the Street’s target of $14.1 billion.

Oracle’s net income rose 26% from a year earlier to $3.15 billion. Revenue from cloud services and license support sales increased 12% to $10.8 billion, accounting for 77% of the company’s total, while sales of cloud and on-premises licenses were up 1%, to $1.2 billion.

In recent years, Oracle’s biggest growth engine has been its cloud infrastructure business, where it competes with companies like Amazon Web Services Inc., Google LLC and Microsoft Corp., and it’s making good inroads in that area as more enterprises move computing workloads out of their own data centers.

Oracle’s cloud unit is positively booming as marquee customers like ByteDance Ltd.’s TikTok and Uber Technologies Inc. scramble to secure the computing power needed for their artificial intelligence projects.

Wall Street analysts have predicted that the cloud infrastructure unit will break through the $10 billion in annual sales barrier by the end of the fiscal year in May 2025, and the company’s latest numbers suggest that target is not unrealistic. During the quarter, cloud infrastructure revenue leapt by 52% from a year earlier, to $2.4 billion.

Oracle Chief Executive Safra Catz said growth in the AI segment of the cloud infrastructure business was nothing short of extraordinary, with graphics processing unit consumption up by 336% from a year ago.

“We have delivered the world’s largest and fastest AI supercomputer, scaling up to 65,000 Nvidia H200 GPUs,” Catz added. “With our remaining performance obligation up 50% to $97 billion, we believe our already impressive growth rates will continue to climb even higher. This fiscal year, total Oracle Cloud revenue should top $25 billion.”

Oracle revealed that it has also signed another agreement with Meta Platforms Inc., which will see the social media giant use its cloud infrastructure to power various generative AI projects related to its Llama large language models.

“Oracle Cloud Infrastructure trains several of the world’s most important generative AI models because we are faster and less expensive than other clouds,” said Oracle Chairman and Chief Technology Officer Larry Ellison (pictured). “The Oracle Cloud trains dozens of specialized AI models and embeds hundreds of AI Agents in cloud applications. For example, Oracle’s AI Agents automate drug design, image and genomic analysis for cancer diagnostics, audio updates to electronic health records for patient care, satellite image analysis to predict and improve agricultural output, fraud and money laundering detection, dual-factor biometric computer logins, and real time video weapons detection in schools.”

Oracle first launched its cloud infrastructure business in 2016, but it struggled to gain much traction until around 2022, when it achieved the economies of scale required to start offering customers some serious cost and performance benefits.

“In the cloud infrastructure market, Oracle has gone from zero to become a major player in just a few years,” said Valoir analyst Rebecca Wettemann. “It has transformed from a non-player to a legitimate competitor against heavyweights like AWS.”

The challenge for Oracle in future will be to move beyond what is currently just a technical pitch, focused on speed and performance.

“Oracle needs to start telling a broader story about how integrated apps running on the same infrastructure can deliver better decision-making insights and stronger foundations for AI,” Wettemann said. “If Oracle can nail this messaging, it can hold its own more effectively against the hyperscalers.”

Despite the impressive cloud growth, Oracle upset investors somewhat with its cautious guidance for the current quarter. The company said it’s forecasting third quarter sales growth of between 7% and 9%, which would mean $14.3 billion at the midpoint. That’s somewhat lower than expected, with analysts hoping for revenue of $14.65 billion.

Oracle’s earnings forecast also came up light, with the company’s guidance of $1.50 to $1.54 per share trailing the Street’s target of $1.57 per share.

Investors made their dissatisfaction with the soft guidance quite clear, as Oracle’s stock dropped almost 8% in the extended trading session.

“Oracle has a reputation for consistently beating estimates, so even a minor miss tends to send Wall Street into a tizzy,” Wettemann said. “

Even with today’s dip, Oracle’s stock remains up more than 80% in the year-to-date, meaning it’s still on track to deliver its best annual performance since 1999.

Photo: Rob Hof/SiliconANGLE