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☁️ 52% Cloud Growth Can't Save Oracle's Q2

☁️ 52% Cloud Growth Can't Save Oracle's Q2

Lucian H & Gun Woo Lee
December 11, 2024

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Good Morning. This is the Investor Lookout with the daily digest.

Here’s what we got today:

☁️ Oracle Falls Short in Q2 Despite AI Growth
🏦 Citi's $135M Regulatory Headache Explained
🤖 Google's Gemini Struggles in AI Workspace Race

Oracle Falls Short in Q2 Despite AI Growth

Even 52% cloud growth couldn't clear Oracle's skies today. Oracle's ($ORCL) Q2 earnings report fell short of market expectations, with cash earnings of $1.47 per share versus the anticipated $1.48. Revenue reached $14.06 billion, up 9% year-over-year but below the projected $14.1 billion. Oracle Cloud Infrastructure showed an impressive 52% growth driven by AI demand. Still, the company's stock dropped almost 7% on Tuesday. Total cloud services grew to $5.9 billion, up 24% from last year, offsetting slowing growth in Oracle's client-premise license revenue.

Credit: Primakov/Shutterstock

Capital spending hit $4 billion, exceeding analyst expectations and resulting in negative free cash flow of $2.3 billion.
Its shares had risen 80% YTD before earnings, outpacing Nasdaq's 32% gain.

Citi's $135M Regulatory Headache Explained

For Citi, the cost of poor integration just hit nine figures. Citigroup ($C) faces continued regulatory challenges as CFO Mark Mason revealed the bank's struggle with compliance requirements stemming from a 2021 $400 million settlement. Speaking at the Goldman Sachs ($GS) Financial Services Conference, Mason attributed the difficulties to poorly integrated internal systems, resulting in additional fines of $135 million from the OCC and Federal Reserve this summer. Despite these issues, Citi reported strong Q3 results with $3.2 billion in net income and expects to hit the higher end of its $80-$81 billion revenue target.

Bank's stock is up 38% YTD, less than the 39% growth of the Dow Jones Banks Index.
The bank is shifting from a product-based to a report-driven approach.

Google's Gemini Struggles in AI Workspace Race

In the battle for AI mindshare, Google finds itself in unusual territory. Internal documents reveal Google's ($GOOGL) Gemini for Workspace is struggling to match competitors in key metrics. The AI productivity suite trails Microsoft ($MSFT) Copilot and ChatGPT in brand familiarity and usage, particularly in established markets. In US commercial segments, Gemini's paid usage is at 22%, trailing competitors by 16 points. Gemini ranks last in brand familiarity across consumer, commercial, and executive categories, behind ChatGPT, Copilot, Meta AI ($META), and Apple ($AAPL) AI.

Credit: Rael Hornby / Laptop Mag, Google / Google DeepMind

A Google spokesperson noted that the data is from early 2024, claiming significant improvements since then.
Gemini performs better in emerging markets than in established ones.

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