Oracle Shares Tumble After Company Reveals Guidance Miss

American multinational computer technology corporation Oracle saw its shares slide on Tuesday after the company reported financial results that beat on both the top and bottom lines.

The drop may have been an result of the company offering less earning guidance than analysts had anticipated as Oracle plans to increase capital expenditures to support cloud computing workloads.

Barclays analysts had also lowered their rating on the stock last month, moving their rating to the equivalent of hold from the equivalent of buy after the price had moved upward as investors rotated out of growth and into value.

“To see further relative outperformance a growth acceleration at Oracle is needed, and we don’t have enough tangible data points for this yet,” the analysts wrote.

For its fiscal fourth quarter ended May 31, Oracle reported earnings of $1.54 a share adjusted, compared to $1.31 a share that was expected by analysts, per Refinitiv.

Revenue at $11.23 billion was also higher than the $11.04 billion that analysts waited for, according to Refinitiv.

The company’s top segment by revenue, cloud services and license support, generated $7.39 billion. This was an increase of 8% and above the FactSet consensus estimate of $7.32 billion in revenue. The company said revenue from its second-generation cloud infrastructure doubled in the quarter, but it did not provide the figure in dollars.

The cloud license and on-premises license segment had added $2.14 billion in revenue, up 9% and more than the $2.05 billion consensus.

Hardware revenue, at $882 million, was exactly in line with analysts’ estimates, declining 2%.

During the fourth quarter Oracle also announced new public-cloud computing options that draw on Arm-based chips.

The U.S. Supreme Court also ruled in a case between Oracle and Google, declaring that Google’s copying of Java code was fair use.

Looking ahead, Oracle CEO Safra Catz has guided for 94 cents to 98 cents in adjusted earnings per share and 3% to 5% revenue growth in the fiscal first quarter. Analysts polled by Refinitiv are however expecting fiscal first-quarter adjusted earnings of $1.03 per share and the equivalent of 3% revenue growth.

“We expect to roughly double our cloud capex spend in FY 2022 to nearly $4 billion,” Catz said. “We are confident that the increased return in the cloud business more than justifies this increased investment, and our margins will expand over time.”

Shares of the enterprise software maker fell 5% in after-hours trading on Tuesday.

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.