Oracle’s (ORCL) cloud expansion falls short again, highlighting the dependency on migration efforts, BofA Securities said in a note.
“Oracle reported disappointing Q2 results, marked by a shortfall to revenue versus consensus estimates,” BofA Securities said.
The company’s cloud revenue increased by 24% year-over-year on a constant currency basis, which, though positive, fell short of the guidance. However, despite the revenue shortfall, Oracle managed to exceed expectations in terms of profitability, reporting pro forma EPS that exceeded predictions, the note said.
BofA Securities said that Software as a service, or SaaS, and infrastructure as a service, or IaaS, growth slowed for Oracle, especially as other cloud service providers are surpassing expectations. The shortfall to guidance raises concerns, suggesting reliance on customer migrations, from legacy on premise e-business suite, compared to new application growth, according to the note.
“We are encouraged by demand signals from Microsoft in the new Oracle DB at Azure partnership,” BofA Securities said. However, that means building 20 new datacenters. The investment firm expects an increase in the fiscal-year 2025 capital expenditure to 15% of total revenue from 13%.
The brokerage reiterated its neutral rating on Oracle and cut its price objective to $122 from $132.