Oracle reports weaker-than-expected earnings amid cloud growth surge

Oracle Corporation fell short of analysts’ expectations in its fiscal third-quarter earnings report released on Monday. While the company continues to experience strong demand in its cloud infrastructure segment, overall revenue and earnings failed to meet forecasts, leading to a mixed financial outlook.

Oracle reported adjusted earnings per share (EPS) of $1.47, slightly below the expected $1.49. Revenue reached $14.13 billion, missing the $14.39 billion analysts had anticipated. This represented a 6% increase from the $13.3 billion reported in the same quarter last year. Meanwhile, net income rose 22% to $2.94 billion, or $1.02 per share, compared to $2.4 billion, or $0.85 per share, in the previous year.

Despite the earnings miss, Oracle’s cloud infrastructure segment continues to thrive. Revenue from this unit surged by 49% year-over-year to $2.7 billion, reflecting the growing demand for computing power to support artificial intelligence (AI) initiatives. The company’s broader cloud services business, which includes infrastructure and software, generated $11.01 billion, making up 78% of Oracle’s total revenue and marking a 10% annual increase.

Oracle Chair Larry Ellison emphasized the company’s commitment to expanding its cloud capabilities. “We are on schedule to double our data center capacity this calendar year,” Ellison said, highlighting record-high customer demand.

Oracle’s position in the AI-driven cloud market received a boost in January when former President Donald Trump announced a partnership involving Oracle, OpenAI, and SoftBank. The initiative, named Stargate, aims to invest billions into AI infrastructure, starting with the construction of data centers in Texas. While this collaboration signals long-term growth potential, Oracle clarified that revenue from the project has not yet been factored into its financial outlook.

Looking ahead, Oracle expects revenue growth of 8% to 10% in the current quarter, slightly below analysts’ expectations of 11% growth to $15.91 billion. The company projects adjusted earnings per share of $1.61 to $1.65, compared to the anticipated $1.79.

Oracle also announced plans to increase its capital expenditures to approximately $16 billion this year—more than double the previous year’s spending—to support its data center expansion. However, CEO Safra Catz noted that fourth-quarter earnings projections were negatively impacted by losses from an investment in another company.

Amid these developments, Oracle’s stock has struggled, declining nearly 11% year-to-date as of Monday’s market close.

Despite the financial shortfalls, Oracle remains committed to returning value to shareholders. The company raised its quarterly dividend by 25%, from 40 cents to 50 cents per share.

While Oracle continues to see robust cloud growth, its near-term challenges—ranging from weaker-than-expected earnings to increased capital expenditures—suggest a complex financial landscape. Investors will be watching closely to see how the company navigates these obstacles while capitalizing on its AI and cloud computing advancements.