Oracle revenue misses estimates as tough economy hurts cloud spending

(Reuters) -Oracle narrowly missed market expectations for first-quarter revenue on Monday as companies pared back spending on cloud services due to an uncertain economic outlook, sending its shares down nearly 5% in extended trading.

After a surge in cloud spending during the pandemic, businesses are rethinking their digitization plans, hurting Oracle (NYSE:) as it plays catch-up in a segment dominated by larger rivals such as Amazon (NASDAQ:) Web Services and Microsoft (NASDAQ:).

Still, the rise in adoption of artificial intelligence (AI) applications could boost Oracle’s cloud infrastructure business as the advances made in its networking technology are more suited to take on AI workloads, analysts have said.

“As of today, AI development companies have signed contracts to purchase more than $4 billion of capacity in Oracle’s Gen2 Cloud. That’s twice as much as we had booked at the end of Q4,” Oracle Chairman and CTO Larry Ellison said.

Shares of the company have gained about 55% so far this year.

Its fastest-growing segment, infrastructure-as-a-service, grew 66% to $1.5 billion. However, revenue from cloud services advanced 30% to $4.6 billion.

Revenue for the quarter stood at $12.45 billion, slightly below analysts’ estimates of $12.47 billion, according to LSEG data.

Excluding items, the company earned $1.19 per share, compared with estimates of $1.15.