Shares of Oracle (ORCL 2.29%) dropped Thursday morning, falling as much as 6.5%. As of 1:48 a.m. ET, the stock was still down 4.4%.
There was no company-specific news to explain the enterprise database and artificial intelligence (AI) specialist's decline. However, a cloud competitor posted results that investors found wanting.
Image source: Getty Images.
Microsoft (MSFT 10.23%) reported its quarterly results after the market close on Wednesday, and the results cast a pall over a wide range of cloud and AI stocks. For its fiscal 2026 second quarter (ended Dec. 31), the cloud software provider generated revenue that grew 17% year over year to $81.3 billion. This fueled adjusted earnings per share (EPS) of $4.14, which rose 24%. The results surpassed expectations, but that wasn't enough to ease investor fears about the future of AI.
The company said it spent $37.5 billion on capital expenditures (capex). The bulk of the spending is earmarked for the cloud and data center resources needed for AI. Microsoft also admitted that the current demand for AI continues to exceed capacity, which bodes well for the future.
Investors widely panned the results, sending Microsoft stock down more than 12%. The concerns stem from fears that the increased spending won't generate sufficient revenue to justify the expense.
NYSE: ORCL
Key Data Points
So, what does this have to do with Oracle?
In December, Oracle released the results that were greeted with a similar, chilly reception. Revenue of $16.1 billion grew 14% year over year, while adjusted EPS of $2.26 jumped 54%. Its remaining performance obligation (RPO) jumped 438% to $523 billion, highlighting Oracle's vast backlog.
The company spent $35.5 billion on capex, up from $10.7 billion in the prior-year quarter. Like Microsoft, investors are concerned that the elevated spending won't yield the necessary return.
After spending much of the past year in the rafters, Oracle's valuation has come back to earth. The stock is now selling for about 31 times earnings, in line with its big tech peers.
Given its vast backlog and lower valuation, Oracle stock is beginning to look intriguing.
