Oracle Corp. fell the most in three months after reporting cloud-computing sales that missed some analysts’ estimates, a setback in the company’s effort to remake itself around internet-based products.
Cloud revenue in the period ended Nov. 30 gained 44% to $1.52 billion, Oracle said Thursday in a statement. John DiFucci, an analyst at Jefferies, was among those who projected stronger growth in Oracle’s cloud sales, with his estimate of $1.55 billion. The company also gave a disappointing forecast for profit and cloud growth in the current period. Shares fell up to 6.36% to $47 Friday in New York, the biggest intraday drop since Sept. 15.
Oracle, a mainstay of traditional corporate computing software, is fighting to catch up in the newer cloud market with established leaders including Amazon.com Inc. and Microsoft Corp. The company has been hiring engineers to build products that let customers rent software and computing power from Oracle, and adding sales reps to transition businesses to the new offerings. The Redwood City, California-based company has also been making acquisitions like last year’s $9 billion purchase of NetSuite Inc. to add cloud clients and programs.
“They’re late to that whole cloud battle,” said Patrick Walravens, an analyst at JMP Securities. “A lot of people already have a solution they are happy with. The question is what does Oracle bring to the table?”
Oracle shares declined as much as 7.3% in extended trading after the report. Investors had been encouraged by the company’s move to cloud-based software this year, sending the shares up 31%. They closed at $50.19 Thursday in New York.
The company projected revenue growth from the internet-based products and services to be 21% to 25% in the fiscal third quarter. Profit, excluding some costs, will be 68 cents to 70 cents a share, below the average analyst estimate of 72 cents, according to data compiled by Bloomberg. The forecast doesn’t take into account currency fluctuations that could boost profit as much as 3 cents a share, co-CEO Safra Catz said on a call with analysts.
As Oracle tries to gain more customers in the rapidly growing cloud market, Amazon is adding products and services directly aimed at luring Oracle’s traditional database customers to switch. At Amazon’s annual cloud conference late last month, the market leader unveiled several new offerings for parsing and storing data and poked fun at Oracle’s price increases. Oracle, meanwhile, offered conference attendees free Tesla rides, during which a sales representative regaled the rider with the benefits of Oracle’s software.
“Investors are thinking this is the next cloud transition story — look what happened with Microsoft, look what happened with Adobe. That should happen with Oracle,” Walravens said. The challenge for Oracle is that a lot of its business is in infrastructure, where Amazon and Microsoft already dominate the cloud market, he said.
At the same time, Oracle continues to sell traditional database and corporate programs that customers run on site. Revenue generated by new software licenses, a measure that’s tied to those products, was little changed in the fiscal second quarter from a year earlier. That compares with a drop of 6.2% in the prior period.
The company reported adjusted revenue rose 6.5% to $9.62 billion in the quarter. Profit, excluding some items, was 70 cents a share.
By Dina Bass, with assistance from Gerrit De Vynck