Oracle sank 9% on Tuesday, after a weak forecast suggested strong competition in the cloud-computing industry and a digital spending pullback were weighing on its revenue growth.
The company was on track to lose about $30 billion in market value, based on its premarket share price of $115.
The stock has risen 55% this year on optimism the rise of generative AI would drive up cloud demand. Lower-than-expected revenue for the first quarter and a below-estimate forecast for the second, however, signaled the boost from AI would take longer to materialize.
Oracle, known for its database software, has been playing catch-up with cloud majors such as Amazon Web Services, Microsoft's Azure and Alphabet's Google Cloud at a time businesses are dialing back tech spending over concerns about the economy.
CEO Safra Catz also warned of near-term weakness in revenue growth at the Cerner health records business, which Oracle bought for $28.3 billion last year. The company is moving customers in the unit to the cloud from license purchases that are recognized upfront.
"We continue to believe high single-digit growth might be unsustainable for Oracle given Cerner integration risks and formidable data center competition," D.A. Davidson analyst Gil Luria said, as he cut his price target on the stock to $105.
Most analysts, however, were positive on the company and attributed the share price decline to Oracle's rally in the run-up to earnings.
"Shares were already up a lot recently so Q1 doesn't look like a short-term catalyst," Barclays analysts said. But they highlighted strong deferred revenue, AI backlog commentary and some positive signs in the cloud business as positives.
At least 14 brokerages raised their price targets on the stock, pushing the median view to $133, according to LSEG data. That is nearly 5% higher than the company's last closing price.
Oracle has a 12-month forward price-to-earnings ratio of 21.78, compared with the industry median of 15.42.
(Reporting by Aditya Soni in Bengaluru; Editing by Krishna Chandra Eluri)