LONDON (ShareCast) - (ShareCast News) - US software group Oracle announced on Thursday that it expected revenues in its second quarter to grow by just 2% to 4%, compared to the market consensus of 4.7%, amid analysts' concerns over the firm's ability to defend its margins.
In a call with analysts, co-chief executive Safra Catz said Oracle was continuing investments into building out its cloud-computing infrastructure, potentially putting further pressure on profits.

"There is a startup cost to getting into these businesses," co-chief executive Mark Hurd said when asked about the outlook. "We're deployed now virtually in all the critical geographies...so you just see it show up in the margin rate."

Oracle's combined cloud revenue rose 51% to $1.46bn in the three months leading to 31 August, but that figure accounted for a much smaller 16% of the group's overall $9.2bn revenue in the quarter, even as some investors were put off by Oracle's outlook for sales.

A key factor in Oracle's growth over the quarter was its 2016 acquisition of NetSuite, which had 12,000 enterprise resource planning (ERP) customers; a number the firm said was "30 times more" than its market rival Workday.

Oracle said its future growth would be fuelled organically by its current businesses rather than acquisitions as co-chief executive Larry Ellison said, "There's no one left to buy."

"I think it's going to be primarily coming from internally developed technologies, the growth of those technologies and us gaining dramatic amounts of share in applications in the cloud and with our new autonomous database," said Ellison.

Nonetheless, Oracle's stock price had set record closes in the days before the earnings were released, gaining 37% on Thursday against an 11.6% advance for the S&P 500 over that same time frame.

Hence, it was of little surprise that Oracle shares fell in after-hours trading.

Ahead of the opening bell at 1357 BST, Oracle shares were trading 3.39% lower at $51.00.

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