Oracle posts weak cloud sales, raising fears of delayed payoff

(Bloomberg) — Oracle Corp . showed disappointing cloud revenue, suggesting it will take longer than expected for the company’s recent big AI bookings to pay off. Fiscal second-quarter cloud sales rose 34% to $7.98 billion, while revenue in the company’s precision infrastructure business increased 68% to $4.08 billion. Both figures fell just short of analysts’ estimates. Remaining performance obligation, a measure of bookings, rose to $523 billion in the fiscal second quarter, which ended Nov. 30, the company said in a statement Wednesday. Analysts had estimated an average of $519 billion, according to data compiled by Bloomberg. Known for its database software, Oracle has recently found success in the competitive cloud computing market. It is busy with a massive data center build-out to power AI work for OpenAI and also counts companies such as ByteDance Ltd. ‘s TikTok and Meta Platforms Inc. as large cloud customers. However, Wall Street has raised doubts about the costs and timelines needed to develop AI infrastructure on such a massive scale. Oracle has taken out significant amounts of debt and committed to leasing several data center sites. Investors want to see Oracle turn its higher spending on new data center infrastructure into revenue as quickly as it has promised. Capital spending, a measure of data center spending, was about $12 billion in the quarter, up from $8.5 billion in the prior period. In September, the company projected capital expenditures of $35 billion for the fiscal year. Analysts had expected $8.25 billion in capital spending in the quarter. “Oracle is very good at building and managing high-performance and cost-effective cloud data centers,” Clay Magouyrk, one of Oracle’s two chief executive officers, said in the statement. “Because our data centers are highly automated, we can build and manage more of them.” The shares fell 5% in extended trading after closing at $223.27 in New York. The stock has lost about a third of its value since Sept. 10, when investor enthusiasm over Oracle’s cloud business pushed the company to an all-time high. This is Oracle’s first earnings report since longtime CEO Safra Catz was succeeded by Magouyrk and Mike Sicilia, who share the CEO job. Part of the negative sentiment from investors in recent weeks has been linked to increased skepticism about the business prospects of OpenAI, which faces more competition from companies such as Alphabet Inc. ‘s Google view, Kirk Materne, an analyst at Evercore ISI, wrote in a pre-earnings note. Investors would like to see Oracle management explain how they can adjust spending plans if demand for OpenAI changes, he added. –With assistance from Ian King. More stories like this are available on bloomberg.com ©2025 Bloomberg LP