Oracle could be in troubled waters as it reported a 12 percent slide in profits for the second fiscal quarter.
Oracle's net income for the second quarter ended Nov. 30, slid from $2.5 billion (56 cents per share) in the same period in 2014 to $2.2 billion (51 cents per share).
On Wednesday, Dec. 16, at an earnings call Oracle delivered a Q3 profit forecast which did not meet analysts' expectations.
The profit estimation for Q3 was 63 to 66 cents per share (revenue being flat or up by 3 percent which is equivalent to $9.33 billion to $9.61 billion), whereas analysts on average were expecting profits of 65 cents per share on $9.28 billion revenue.
"This is a softer outlook than the Street was expecting and speaks to the massive growth challenges ahead," said Daniel Ives, analyst with FBR Capital Markets.
Pundits believe that Oracle's transition from licensing software to cloud subscriptions has impacted the company's margins.
For the unfamiliar, Oracle has been shifting its business to a cloud-based model vis-à-vis the traditional one. It now offers services remotely through its data centers instead of selling installed software as in the past.
In the second fiscal quarter, the revenue Oracle generated from its cloud computing software showed a 34 percent increase to $484 million.
While the software maker's fortunes were partly buoyed by its cloud business gathering impetus in the latest quarter, the currency fluctuations contributed to holding down Oracle's primary lines.
The currency fluctuations impacted Oracle's operating earnings which were down by 17 percent to $2.9 billion.
The company's revenue generation for the second quarter from product support and software license updates also declined, falling 1.8 percent to $4.68 billion. The hardware division at Oracle was also hit as it declined 16 percent to $1.12 billion.
