Oracle stock drops after underwhelming earnings, as analysts grow skeptical about its cloud ambitions

  • Oracle beat Wall Street estimates on earnings per share, but came in just below revenue estimates.
  • The company issued guidance for fourth-quarter cloud revenue that fell below analyst estimates.
  • After Tuesday's plunge, Oracle shares are down roughly 1 percent year-to-date and up nearly 4 percent in the last 12 months.
Mark Hurd, CEO of Oracle Corporation
Lucy Nicholson | Reuters
Mark Hurd, CEO of Oracle Corporation

Shares of Oracle fell as much as 10 percent Tuesday following a third-quarter earnings report that "generally underwhelmed on most relevant metrics," according to Credit Suisse analysts.

The company beat Wall Street estimates on earnings per share, reporting 83 cents compared with Thomson Reuters consensus estimates of 72 cents, but came in just below revenue estimates, dragged down by slow cloud revenue growth.

The enterprise software company reported $9.77 billion in revenue compared with $9.78 billion expected by analysts.

"While the Company is benefiting from a less-than-expected decline in on-premise license revenue, it appears the Company's transition to the cloud is taking longer than we had initially expected," KeyBanc analysts said in a note.

Oracle reported total cloud revenues — which includes cloud service, platform and infrastructure — of $1.6 billion for the third quarter and issued guidance for fourth-quarter cloud revenue that fell below analyst estimates.

KeyBanc said that Oracle's cloud competitors Microsoft, Salesforce and Amazon Web Services are growing faster than Oracle, even though they all have larger cloud revenues. "This means it could be difficult for ORCL to catch up with its cloud peers," KeyBanc analysts said.

After Tuesday's plunge, Oracle shares are down roughly 1 percent year-to-date and up nearly 4 percent in the last 12 months.

— CNBC's Jordan Novet contributed to this report.