Why Oracle Stock Is Sinking Today

Shares of Oracle (NYSE: ORCL) are sliding on Tuesday. The stock lost 3.2% as of 2:45 p.m. ET today and was down as much as 7.5% earlier in the day. The drop comes as the S&P 500 declined 0.5% and the Nasdaq Composite gained 0.2%.

The tech company reported mixed quarterly results that fell short of expectations while providing ambitious long-term projections.

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Mixed earnings report

Oracle announced third-quarter earnings of $1.47 per share on sales of $14.1 billion. Both figures missed Wall Street estimates of $1.49 per share and $14.4 billion in revenue. Adjusted earnings increased just 4% year over year (YOY) while sales gained 6% YOY.

The company's guidance for its fourth quarter of 9% revenue growth also missed previous forecasts of 9.5% growth.

A strong outlook

Despite the earnings miss, CEO Safra Catz was optimistic, saying, "What we are seeing in the market is that we are the destination of choice for both AI training and inferencing." The company expects to see money begin to flow in from the Stargate program, with chairman Larry Ellison saying the company expects its "first large Stargate contract fairly soon" and that "Stargate looks to be the biggest AI training project out there."

Oracle is expanding its data center capacity to meet demand for AI with capital expenditures expected to grow to $16 billion for fourth quarter, roughly doubling from a year earlier.

Despite the earnings miss, given its growth prospects and reasonable price-to-earnings ratio (P/E) of 34, I think Oracle could be a solid addition to a well-diversified portfolio.

Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Oracle. The Motley Fool has a disclosure policy.