Oracle misses expectations and slips on the stock market, but doubles down on AI and “mega cloud infrastructure”

The tech giant led by Larry Ellison missed revenue expectations, closing its fiscal second quarter with mixed figures, triggering a sharp 11% drop in after-hours trading and dragging down the entire AI sector. The slowdown even hit heavyweights like Nvidia and AMD, both slightly lower, as well as cloud provider CoreWeave, which fell more than 3%.

Yet on the earnings front, Oracle surprised: adjusted earnings came in at $2.26 per share versus the expected $1.64. What weighed on trading instead was revenue, stuck at $16.06 billion compared with the forecasted $16.21 billion. Guidance for the new quarter remains cautious: earnings between $1.70 and $1.74 per share and revenue growth of up to 21%, in line with market expectations.

Cloud continues to be the company’s engine. Revenue reached $7.98 billion, slightly above consensus, while cloud infrastructure jumped 68% to $4.1 billion. Among the customers mentioned are Airbus, Canon, Deutsche Bank, and LSEG. Traditional software, however, declined 3%.

The most striking figure concerns RPOs, contracted but not yet recognized revenue: up 438% to an astonishing $523 billion. A massive boost driven by new deals with Meta, Nvidia, and other AI players. OpenAI itself has committed to spending more than $300 billion on Oracle infrastructure services over five years.

But this sprint comes at a cost, as the expansion strategy requires enormous investments: $50 billion in capex projected for the fiscal year, compared to the previously estimated $35 billion. In the quarter, free cash flow fell to –$10 billion, worse than expected. It’s no surprise, then, that the stock is coming off a bleak November (–23%) and remains well below all-time highs.

Also making noise is the sale of the stake in Ampere, which generates a $2.7 billion gain. Ellison explains the move as a pivot toward “chip neutrality”: Oracle is abandoning in-house chip design and preparing to integrate whatever hardware customers choose, while maintaining its partnership with Nvidia.

Amid colossal investments, rising debt, and an AI demand that keeps exploding, Oracle is now playing a decisive game: fully transforming into a cloud infrastructure superpower - or risking being overwhelmed by the AI race before reaching the finish line.

Andrea Pelucchi