Oracle Corp, the software giant, has reported a slowdown in its cloud computing business, causing its shares to drop more than 7% in after-hours trading on December 11. The company has projected fiscal third-quarter revenue to be below estimates due to strong competition in the cloud computing market and an uncertain economy, negatively impacting cloud service demand.
According to Bloomberg, this slowdown has fueled investor concerns that the software maker’s expansion efforts have yet to gain ground in the competitive market. Oracle's cloud revenue rose 25% to $4.8 billion in the period ended November 30, after registering a 30% gain in the previous quarter, which represents the second consecutive quarter of slowing growth.
In the fiscal second quarter, Oracle's sales increased by 5% to $12.9 billion, slightly below the average estimate of $13.1 billion. However, the company's profit, excluding certain items, stood at $1.34 per share, beating the average estimate of $1.33.
The company has attributed its slowdown to an uncertain economy and intense competition in the cloud computing market, which has caused a decline in cloud service demand. The news of Oracle's slowdown in cloud computing has caused many to question the company's ability to compete in an increasingly crowded market.
Oracle Chairman Larry Ellison assured investors that half of all existing Cerner customers would be on the cloud by February, with the expectation that the unit would no longer impede Oracle's growth soon. CEO Safra Catz mentioned an anticipated decline of 1 to 2 percentage points in Cerner revenue for the fiscal year.
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Despite a 52 percent growth in infrastructure during the fiscal second quarter, down from 66 percent in the previous period, CEO Catz and Chairman Ellison, remain optimistic about the business.
"Oracle is in the process of expanding 66 of our existing cloud data centres—and building 100 new cloud data centres—to meet growing demand," said Chairman Ellison. Ellison also emphasised the company's substantial investment in expanding its capacity to meet the increasing demand for cloud services.
The company's future growth, according to the CTO, is dependent not only on customer demand but also on the availability of graphics processors essential for powering artificial intelligence workloads in data centres.
Oracle is striving to enhance its cloud infrastructure business to compete more effectively with industry giants like Amazon.com Inc., Microsoft Corp., and Alphabet Inc.'s Google, according to the Bloomberg report.
The company's shares declined to $103.82 in extended trading, compared to the closing price of $115.13 in New York, contributing to a 41 percent gain for the year, trailing behind the iShares Expanded Tech-Software Sector ETF's 55 percent rally.
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