Will the ORCL Stock Sell-off Continue?

Oracle (NYSE: ORCL) saw its stock fall by 13.5% in a single trading session this week following the announcement of the company’s fiscal Q1 results. While Oracle surpassed earnings estimates in the quarter (ended in August), its revenue and guidance were below consensus estimates. 

Oracle reported adjusted earnings of $1.19 per share, slightly above the $1.15 per share analysts had anticipated. The company posted $12.45 billion, just shy of the predicted $12.47 billion.

Looking ahead, Oracle's guidance for its fiscal second quarter includes an adjusted net income ranging from $1.30 to $1.34 per share and a revenue growth of 5% to 7%. However, analysts had forecasted slightly higher figures: $1.33 in adjusted earnings per share and a revenue of $13.28 billion, implying an 8% growth in revenue.

On the brighter side, Oracle saw its revenue jump 9% year over year in the fiscal first quarter ending August 31. Furthermore, net income surged to $2.42 billion (or 86 cents per share), a notable rise from the prior year's $1.55 billion (or 56 cents per share).

It's worth mentioning that in June 2022, Oracle finalized its significant $28.2 billion purchase of Cerner, an electronic health record software firm. As a result, Oracle is rapidly shifting Cerner's operations to the cloud. However, this transition has somewhat tempered the company's revenue growth, as pointed out by Oracle's CEO, Safra Catz, during an analyst conference call.

Oracle stock is up 31% in 2023

Despite the recent pullback, Oracle, a titan in the tech industry, has seen its stock soar by 31% this year and by 44% over the past twelve months. The surge in value has propelled the company's market capitalization to an impressive $297 billion. 

Oracle’s solid performance has meant the company’s CEO, Larry Ellison, is now among the five wealthiest individuals in the world, according to Forbes. Ellison isn’t just a founder according to SEC records, he is also the principal shareholder of Oracle, boasting a 42.9% stake.

Historically, ORCL's stock has consistently outpaced the broader market indices. Over the past five years, factoring in dividends, the stock skyrocketed by 141%. In comparison, the S&P 500 index rose 69% since September 2018. Extending the timeline to a decade, Oracle's stock appreciated by an astonishing 290%, a figure that stands tall against the S&P 500's returns of 219%.

At its core, Oracle specializes in IT products and services tailored for business enterprises. Its suite of offerings encompasses enterprise solutions and infrastructural tools that are deployable across various IT models—be it traditional on-site, cloud-centric, or a blend of both. The goal? Enhancing the efficiency, safety, dependability, and cost-effectiveness of the clientele.

A prime example is the Oracle Autonomous Database, which integrates machine learning to streamline functions that once required manual intervention. Once clients choose Oracle, they gain access to a vast portfolio of solutions complemented by the company's in-depth industry know-how. Additionally, clients can opt for or renew diverse support services related to their software licenses and hardware setups.

ORCL stock might gain pace as it bets big on AI

The recent surge in Oracle's stock can be attributed to its unveiling of plans to delve into the realm of generative artificial intelligence (AI) services aimed at its global customer base. Oracle envisions these AI-driven solutions as transformative tools that streamline business operations, refine decision-making processes, and amplify customer interactions.

To bring this vision to life, Oracle has joined forces with Cohere, a Canadian AI startup that is a frontrunner in the large-language model (LLM) domain. Notably, Cohere recently secured a funding boost of $270 million, which raised its valuation to a commendable $2.2 billion. Tech powerhouses such as Salesforce (NYSE: CRM) and the semiconductor leader Nvidia (NASDAQ: NVDA) are among the notable investors in Cohere.

Oracle has clarified that this avant-garde AI solution will be anchored in the Oracle Cloud Infrastructure (OCI). This ensures that Oracle can present a comprehensive generative AI platform fortified with top-tier security protocols and a diverse range of cloud-based applications.

Related: Will the Tech-Sell Off Continue This Week for the S&P 500?