Oracle (ORCL) fell after its latest quarterly update raised new doubts about the pace of its AI and cloud growth. Revenue came in at $16.1 billion, slightly below Wall Street expectations, and the company signaled that heavy spending on data-center expansion will continue, which put pressure on margins. Earnings per share were $2.26, ahead of analysts’ consensus estimate of $1.64, but the beat was not enough to ease concerns around slowing growth and rising costs.
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Q2 Earnings Results Raise New Questions
Oracle has positioned itself as a major cloud provider for AI customers, but the results showed that this demand is not yet converting into revenue as quickly as investors hoped. Management pointed to slower deal timing and ongoing investment needs across its cloud and AI infrastructure, which weighed on sentiment.
Rising costs were another concern. Oracle said it must keep investing heavily to expand capacity for large AI workloads. While this supports long-term positioning, it limits near-term profit growth — a key reason the stock came under pressure.
AI Narrative Faces a Reality Check
Oracle’s AI strategy has been central to its recent valuation momentum. Many investors viewed the company as a late but important entrant in the AI buildout, supported by partnerships with major enterprise clients and large GPU suppliers.
However, the latest results suggest the revenue ramp will take longer than expected. Analysts noted that backlog growth is strong but not yet translating into faster top-line momentum. Several pointed out that Oracle needs to show clearer conversion of its AI commitments into recurring cloud revenue before confidence returns.
What to Watch Next
Analysts still see long-term value in Oracle’s cloud transition, but they expect more volatility until the company delivers stronger cloud revenue, better backlog conversion, and clearer returns on its growing infrastructure spend.
For now, the quarter has paused Oracle’s momentum and raised the bar for what investors want to see next.
Is ORCL Stock a Good Buy?
Wall Street has a Moderate Buy consensus rating on Oracle stock based on 25 Buys, 11 Holds, and one Sell recommendation. The average ORCL stock price target of $347.93 indicates 58% upside potential. However, it’s worth noting that estimates will likely change following today’s earnings report.
