Oracle Stumbles, But Remains Focused on AI

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Oracle (NYSE: ORCL) recently reported its first quarter results that failed to impress the market. The miss in the revenue performance and outlook sent the stock falling 9% in the after-hours trading session.

Oracle’s Financials

Revenue for the first quarter grew 9% to $12.45 billion, slightly below analyst estimates of $12.47 billion. Net income was $2.4 billion or $0.86 per share. Adjusted EPS was $1.19. The market was looking for an EPS of $1.15.

Cloud services and license support revenues grew 13% to $9.5 billion. Cloud license and?on-premise?license revenues fell 10% to $0.8 billion. Hardware revenues also registered a 6% reduction to $714 million. Services revenues grew 2% to $1.4 billion.

Oracle projected the second-quarter revenue growth to be 5%-7%, lower than analysts’ average estimate of 8.2%. Oracle also expects adjusted profit of $1.30-$1.34 per share, compared with estimates of $1.33.

Oracle’s Growth Focus

Recently, Oracle announced its plans to add semantic search capabilities using AI vectors to Oracle Database 23c. The collection of features, called AI Vector Search, includes a new vector data type, vector indexes, and vector search SQL operators that enable the Database to store the semantic content of data as vectors, and use these to run fast similarity queries. These new capabilities also deliver responses to natural language questions and provides higher accuracy while avoiding exposure to private data.?By adding AI Vector Search to Oracle Database, customers will be able to easily leverage AI while ensuring security, data integrity, and performance.

They will also enable apps based on Oracle Database and Autonomous Database to incorporate an LLM-based natural language interface, providing a simple and intuitive way for end-users to ask for the data they need by just posing natural language questions. In addition, Oracle Database tools such as APEX and SQL Developer will be enhanced with generative AI capabilities to allow developers to use natural language to generate applications or generate SQL queries without needing to write code.

Oracle also added new AI-powered capabilities within Oracle Analytics Cloud. Leveraging the Oracle Cloud Infrastructure (OCI) Generative AI service, the new capabilities assist analytics self-service users to conduct their analysis without having to wait for data scientists or IT teams. Some of the new features include generative AI data interactions that allow interaction with data and dashboards through natural language and generative-AI created responses; AI-Powered document understanding to enrich analytics by extracting key values and their context from documents; contextual insights that uses ML to recommend insights; and collaboration software integrations for users to post dashboards, visualizations, and insights into real-time discussions through a new integration with Microsoft Teams.?

Recently, Oracle also announced the availability of OCI Generative AI service that will support LLMs to help organizations automate end-to-end business processes. The Generative AI service is a managed service that enables users to integrate LLMs in their own applications through an available API. Once generally available, this service will work seamlessly with AI Vector Search and will form the basis for generative AI capabilities embedded across Oracle’s suite of SaaS applications, including Oracle Fusion Cloud Applications Suite, Oracle NetSuite, and industry applications such as Oracle Cerner.

Oracle’s stock is trading at $104.52 with a market capitalization of $293.3 billion. It was trading at a 52-week high of $127.54 in June. The stock hit a 52-week low of $61.65 in September last year.

Disclosure:?All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article. I am an investor in this company.

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