Oracle stock fell Tuesday as the market digested the software company’s slowing cloud growth. Wall Street analysts are still skeptical as to whether Oracle’s attempts to compete in data-center infrastructure with bigger rivals will pay off.
Oracle was down 8.5% in premarket trading at $105.31 following the release of its late on Monday.
Analysts said Oracle’s cloud revenue growth of 25% — down from 29% the previous quarter — had been broadly in line with their expectations but questions remained about its strategy for future acceleration. Oracle is building 100 new data centers as it said demand was outstripping capacity for its Oracle Cloud Infrastructure businesses.
Oracle has said it can more cheaply than market leaders Amazon.com, Microsoft and Google-parent Alphabet. However, it’s still a potentially expensive investment while it grapples with integrating electronic health records company Cerner, which it acquired in 2022.
“We believe HSD [high single digit percentage] growth for the company may prove unsustainable with Cerner integration headwinds and increasing competition in the datacenter market,” D.A. Davidson analyst Gil Luria wrote.
Luria kept a Neutral rating and $105 target price on Oracle stock.
Oracle is hoping its strategy will be justified by the for cloud computing caused by the growth of artificial-intelligence technology.
“While Oracle is experiencing solid demand momentum in its OCI [Oracle Cloud Infrastructure] business, we believe the stock is already embedding expectations for revenue acceleration and generative AI tailwinds,” wrote William Blair analyst Sebastien Naji in a research note.
Naji kept a Market Perform rating on the stock with no target price.
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