(Reuters) -Oracle's shares tumbled more than 9% on Tuesday after its quarterly revenue fell short of Wall Street expectations, signaling investor concerns over fierce competition in the cloud business amid booming demand from AI service providers.
At $172.78, the company was on track to lose nearly $50 billion in market capitalization if losses hold.
Oracle (NYSE:ORCL)'s shares have soared more than 80% this year through Monday, as investors cheered its investments to boost its cloud infrastructure to cater to the growing demand for artificial intelligence and to bridge the gap with market leaders.
"With the rapid backlog build appearing to level out, investor focus likely shifts towards the income statement and Oracle's ability to convert this demand into accelerating revenues and durable double-digit EPS growth," Morgan Stanley (NYSE:MS) analysts said in a note.
Oracle reported $14.06 billion in second-quarter revenue, a 9% increase from a year earlier, but below analysts' average estimate of $14.11 billion, as per data compiled by LSEG.
Investors have been betting on AI-related firms as they expect the technology to be a strong future growth driver.
"Oracle cloud infrastructure revenue remains heightened as demand for AI compute grows on the platform," said D.A. Davidson in a note.
At least 21 brokerages raised their price targets on the stock, with two of them raising their expectations to $220.
"We also still believe that the multi-cloud agreements previously announced (like the ones with Azure and Google (NASDAQ:GOOGL) Cloud) help boost the margins of the legacy business, which helps offset the mix to OCI (though OCI margins are improving)," said analysts at Melius Research, referring to the cloud business.
Oracle's 12-month forward price-to-earnings ratio is 28.08, compared to Microsoft (NASDAQ:MSFT)'s 31.86 and Amazon (NASDAQ:AMZN)'s 36.66.