Shares of American enterprise software giant Oracle (ORCL) saw a significant sell-off on Tuesday afternoon after media reports revealed that gross profit margin from its AI cloud business was lower than estimated on Wall Street. ORCL stock was down nearly 4% to about $280 per share as of 1:41 p.m. EDT on Tuesday.
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According to The Information, which broke the story, Oracle pulled in about $900 million during its recent quarter from renting out its servers, which are powered by Nvidia’s (NVDA) chips. However, the company reportedly only made about $125 billion from these sales, meaning that it returned a gross profit margin of about 14%.
A gross profit margin excludes several expenses, including operating expenses, taxes and interest. It is an important metric for all businesses as it points to the level of their profitability.
Oracle Lost Almost $100M from Blackwell Chip Rentals?
Meanwhile, the outlet also reported that Oracle lost almost $100 million from renting out Nvidia’s Blackwell Chips during its most recent quarter.
TipRanks’ data shows that Oracle’s gross profit margin over the last 12 months stands at 69.66%. Furthermore, Bloomberg calculation shows Oracle’s gross profit margin during its Q1 2026 results came in at 67.3%, the lowest in over a year.
A gross profit margin of 14% on its AI cloud business raises concern for Wall Street investors, especially about its profitability. This is even as its AI cloud business has emerged as a critical source of its revenue following the recent landmark $300 billion cloud deal with AI startup OpenAI.
The deal pumped ORCL stock as high as 40% to its biggest single-day rally since 1999. However, analysts have also raised the alarm on Oracle’s reliance on OpenAI for a significant portion of its future revenue.
Is ORCL Stock a Good Buy?
Across Wall Street, Oracle’s shares currently have a Moderate Buy consensus recommendation from analysts. This is based on 25 Buys, eight Holds, and one Sell assigned by 34 Wall Street analysts over the past three months.
However, the average ORCL stock price target of $341.47 implies approximately 22% upside potential from the current price.
