Oracle Shares Plummet as Disappointing Revenue and Weak Guidance Send Shockwaves Through Market
Redwood Shores, Calif. – In a stunning turn of events, Oracle shares plunged over 12% on Tuesday, marking their worst day in over two decades. The software giant reported disappointing revenue and issued weaker-than-expected guidance, sending shockwaves through the market.
Analysts were quick to highlight that not since the dot-com bust in March 2002 had Oracle experienced such a steep percentage drop. The decline was so significant that Larry Ellison, Oracle’s Chair and Chief Technology Officer, saw a staggering $18 billion wiped off his wealth. Despite this, Ellison still remains the world’s fourth-richest person, with a net worth of $142.5 billion, according to Forbes.
While Oracle’s earnings managed to surpass estimates, the company reported first-quarter revenue of $12.45 billion, falling short of the $12.47 billion average analyst estimate, according to LSEG. Additionally, the guidance for the current quarter indicated a revenue increase of only 5% to 7%, falling short of the 8% average analyst estimate.
Oracle, like many other tech companies, had been promoting the benefits of artificial intelligence (AI) to its business. The company recently added AI features to its Fusion Cloud and Human Capital Management Software, and Ellison stated that AI development companies had signed contracts to purchase more than $4 billion of capacity in Oracle’s Gen2 Cloud. However, Stifel analysts stated in a report that investors were expecting more AI and cloud-related upside, which contributed to the disappointment in Oracle’s results.
Oracle CEO Safra Catz shed light on challenges faced by the company’s Cerner unit, which was acquired for $28.2 billion last year. Catz explained that the unit was undergoing an “accelerated transition” to the cloud, resulting in near-term headwinds affecting its growth rate.
Despite the steep decline in Oracle’s stock, the shares are still up 36% year to date, outperforming the S&P 500, which has gained 17% during the same period. This indicates that, even with the setback, Oracle remains a solid investment option.
As the industry grapples with the impact of Oracle’s performance, investors are advised to manage their risk given the near-term volatility of the company’s stock.
CNBC’s Jordan Novet contributed to this report.
WATCH: Oracle’s near-term volatility means investors should manage risk.