Oracle earnings disappoint again — but is the glass half full?

As Oracle Corp. shares headed for their second sharp post-earnings selloff in as many quarters, some bulls saw a silver lining.

While Oracle ORCL, -10.85% missed slightly on the top line with its latest quarterly results and saw its Oracle Cloud Infrastructure business once again decelerate, bullish analysts noted that the software and applications company continues to face capacity constraints.

“[F]or those willing to take more of a ‘glass half full’ approach — the [fiscal third-quarter] guidance infers acceleration in revenue (+6-8%) and the company continues to see a nice build in backlog,” Evercore ISI analyst Kirk Materne wrote in a note to clients.

Investors want to see whether the backlog for OCI turns into stabilizing growth for that part of the business, according to Materne.

“Our view is that if OCI growth can stabilize in the 50% range over the next few quarters, the risk/reward skews materially to the upside at current levels,” he wrote. “We acknowledge that Oracle is likely to remain in ‘show me’ mode in the near term, but when digging beyond the [fiscal second-quarter] revenue shortfall — the guidance and backlog point to a potential reacceleration in revenue in [calendar year 2024] and we believe the optionality around the public cloud market opportunity represents material upside.”

He has an outperform rating on Oracle shares, although he lowered his price target to $130 from $135 in a Tuesday note.

Oracle’s stock was off 9.5% in Tuesday morning trading.

Opinion: Oracle embarks on potentially risky data-center expansion as its cloud growth slows

Bernstein analyst Mark Moerdler noted that Oracle builds smaller data centers than its hyperscaler peers, part of why the company is currently experiencing an imbalance between demand and supply.

“We believe Oracle will work through this as it did the server supply issues, and management is convinced that demand is not going elsewhere as they wait what could be months for all their capacity,” he wrote. “We see this as growing pains and therefore not an issue for our thesis.”

Like Materne, he sees better days ahead. “Supply chain issues have continued, but demand is strong, and the results should shine through later in [the second half] and especially [in the fourth quarter],” he wrote. “This is going to be a back-half story as we saw last year, and [the fourth quarter] could again be a banner quarter.”

Moerdler has an outperform rating on Oracle’s stock, and he lifted his price target to $147 from $144 in his latest note.

Wolfe Research’s Alex Zukin stuck with his upbeat thesis as well, reiterating an outperform rating, though cutting his price target to $130 from $140.

“While shares pull back, we remain positively biased as management is not taking any of its prior targets off the table, guiding to accelerating organic cloud growth next quarter, as capacity continues to ramp while underlying demand trends remain unchanged and [graphics-processing-unit] availability is NOT limiting [Oracle’s data-center] build-out,” he wrote.

William Blair’s Sebastien Naji, however, questioned whether an improvement in business trends would really surprise Wall Street.

“While Oracle is experiencing solid demand momentum in its OCI business, we believe the stock is already embedding expectations for revenue acceleration and generative AI tailwinds,” he wrote, while sticking with his market-perform rating.