Oracle Stock Is Tanking After Q2 Report – Analyst Points Out Timing Mismatch Between AI Buildout Expenses, Revenue Conversion

Oracle Corp. (ORCL) shares fell nearly 11% pre-market on Thursday after the company’s second-quarter (Q2) results fell short of Wall Street expectations.

Analysts at Bank of America Securities and Bernstein SocGen Group cut their price targets on the stock following the mixed Q2 performance, according to TheFly.

BofA Securities cut its target to $300 from $368 while maintaining a ‘Buy’ rating on the stock. Bernstein analysts trimmed their target to $339 from $364, while maintaining an ‘Outperform’ rating.

Retail sentiment on Stocktwits around the Oracle stock trended in the ‘extremely bullish’ territory. Oracle was the top trending ticker on the Stocktwits platform at the time of writing.

Oracle reported earnings per share (EPS) of $2.26 on revenue of $16.06 billion, compared to analyst estimates of an EPS of $1.64 on revenue of $16.19 billion, according to Stocktwits data.

What Are Analysts Concerned About?

BofA Securities analysts pointed to a timing mismatch between Oracle’s AI buildout expenses and revenue conversion. While the company’s cloud infrastructure revenue grew 68% year-on-year to $4.1 billion, its capital expenditure rose to $12 billion, which was $4 billion higher than analyst estimates.

However, the firm stated that the gap between Oracle’s spending and revenue reflects an investment-curve issue rather than a change in its fundamentals.

Bernstein analysts flagged Oracle’s mixed performance and the increase in its capital expenditure during the quarter. The firm also flagged the lack of specific quantitative details around Oracle’s business economics as an ongoing concern for its investors.

Oracle’s Shares Jumped In September

Oracle shares rallied more than 24% in September after the company announced that the 4.5-gigawatt capacity deal struck with OpenAI is valued at more than $300 billion and set to be executed over five years.

ORCL stock has since then declined nearly 21%. If the stock opens 11% lower, as pre-market trends suggest, it would be the lowest level for the shares in almost six months.

Get updates to this story developing directly on Stocktwits.

Also See: Elon Musk Reveals Where He Is Allocating Most Of His Time At Tesla: ‘AI5 Will Be Good, AI6 Will Be Great’

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