Oracle shares have tumbled following a report that the software maker's profit margin in its cloud computing business is lower than many on Wall Street have been estimating.
Oracle had 14% gross margins on US$900 million in sales of its Nvidia cloud business three months ending August, according to a report from The Information. This is significantly lower than Oracle’s overall gross margin of around 70%.
The Information also reported that the company only managed about $125 million in gross profit in the three months ending in August.
The report also found that Oracle’s recent transformation into one of the most important cloud and AI companies could run into profitability challenges due to the high costs of Nvidia chips and aggressive pricing on its AI chip rentals.
Oracle (NYSE: ORCL) shares fell 2.52% on Tuesday (Wednesday AEDT) to $284.24, and Nvidia (NASDAQ: NVDA) stocks were down 0.3% to $185.04.
