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Oracle reported on Monday fiscal first-quarter results that beat analysts’ forecasts, as an ongoing push by businesses to develop generative artificial intelligence applications boosted demand for cloud services.

While Oracle Corporation (NYSE:ORCL) shares fell more than 3% in after-hours trade following the report, the decline extended to as much as 9% after the management offered a soft outlook for the second quarter on the earnings call.

Oracle announced adjusted EPS of $1.19 on revenue of $12.45 billion. Analysts polled by anticipated EPS of $1.15 on revenue of $12.44B.

Cloud services and license support revenues were up 13% to $9.5B year-on-year, but cloud license and on-premise license revenues were down 10% to $0.8B.

“As of today, AI development companies have signed contracts to purchase more than $4 billion of capacity in Oracle’s Gen2 Cloud. That’s twice as much as we had booked at the end of Q4,” the company said Monday.

Adjusted operating margin rose to 41% from 39% in the same period last year.

On the earnings call, Oracle said it sees total revenue growing 5-7% at today’s currency rates and 3-5% in constant currency. The cloud revenue is seen growing at 28% in CC, below the 29% reported for Q1. This is likely the main source of post-earnings weakness in the stock.

The management attributed the soft cloud outlook to the accelerated transition of Cerner (NASDAQ:CERN) to the cloud.

“This transition is resulting in some near-term headwinds to the Cerner growth rate as customers move from licensed purchases, which are recognized upfront, to cloud subscriptions, which are recognized relatively,” CEO Safra Catz said on a call.

Adjusted EPS is seen at $1.29 (up or down 2 cents), above the $1.25 consensus.

Oracle is due to have its financial analyst meeting next week, where it may update its mid-term outlook.

Goldman Sachs analysts said the company’s Q2 outlook “fell short of lofty expectations.”

“While the print/guide is unlikely to dissuade bulls, we see the current risk/reward skew as balanced in lieu of upside to near-term expects given an already demanding valuation profile,” they wrote in a note.

For Guggenheim analysts, the Oracle bullish thesis remains intact.

“We see little risk in achieving F2Q goals, especially given the $1.5B in bookings in the first week of the quarter. Do these results change our thesis on ORCL? No. We continue to believe that the three legs of growth either still have much to go (SaaS), are at a very early stage (OCI), or are only just beginning (On Prem database migration to the Cloud). We reiterate ORCL as Buy rated and our Best Idea,” they said in a client note.

Author Yasin Ebrahim Editor Ambhini Aishwarya

(Additional reporting by Senad Karaahmetovic)