Oracle Chief Technology Officer Larry Ellison speaks at a company event in Redwood Shores, Calif., on August 7, 2018.
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Oracle Shares fell 12% on Tuesday after the software maker reported disappointing revenue and issued lower-than-expected guidance, their biggest decline in two decades.
The last time the stock fell was a massive 15% at the end of the dot-com recession in March 2002.
Oracle Chairman Larry Ellison lost about $18 billion in wealth as a result of Tuesday’s collapse. With a net worth of $140.6 billion, Ellison is the fourth richest person in the world. forbesBehind Amazon founder Jeff Bezos and ahead of Warren Buffett.
While Oracle’s earnings topped estimates, the company reported fiscal first-quarter revenue of $12.45 billion, falling short of the average analyst estimate of $12.47 billion, according to LSEG. For the current quarter, Oracle said revenue would grow 5% to 7%, below the average analyst estimate of 8%.
Like big tech companies, Oracle is selling investors on the benefits of artificial intelligence in its business. During the quarter, it added AI features to its Fusion Cloud and human capital management software, and Ellison said income details That “To date, AI development companies have signed contracts to purchase more than $4 billion of capacity in Oracle’s Gen2 cloud,” this is double the amount booked at the end of the previous quarter.
However, Stifel analysts wrote in a report after the results that “it was clear investors were pricing in more AI and cloud-related upside.” The firm has a Hold rating and a $120 price target on the stock.
Oracle CEO Safra Catz pointed to challenges at the company’s Cerner unit. In June last year, Oracle closed a business worth $28.2 billion Purchase The electronic health records software company, and now it is in an “accelerated transition” to the cloud, Katz said.
“There are some near-term headwinds to Cerner growth rates as a result of this transition as customers move from licensed purchases, which are pre-accredited, to cloud subscriptions that are pre-accredited,” he said.
Revenue at Oracle’s cloud services and license support segment rose 13% from a year earlier, exceeding StreetAccount’s consensus estimate of $9.44 billion. But sales in the cloud licenses and on-premises licenses segment fell 10% to $809 million, beating estimates.
Despite Tuesday’s stock decline, Oracle shares are up 34% year to date, outperforming the S&P 500, which is up 16%.
— CNBC’s Jordan Novet contributed to this report
Watch: Oracle’s near-term volatility means investors should manage risk
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