Oracle (ORCL) stock dropped sharply after Oracle earnings missed Wall Street’s profit and revenue estimates in what was supposed to be a seasonally strong quarter, but the company’s sunny outlook keeps the bull case on ORCL stock intact.

As investors saw with results from Adobe (ADBE) earlier this week, the transition from selling software outright to collecting subscription revenue from cloud-based services can be pretty rough, but in the end it’s the right move.

Oracle earnings showed that the tech giant is still in the early stages of this strategic course correction, and the market is making no secret of its displeasure. Oracle stock plunged 5% in opening trades Friday. That’s a massive move considering the enormous $180 billion market cap of Oracle stock.

But as disappointing as the Oracle earnings report may have been, it shouldn’t be too long before the market begins to focus on the Oracle earnings outlook. That should help pick up ORCL stock, because it will highlight the benefits of shifting to cloud-based software services.

The latest results were especially underwhelming given that the fiscal fourth quarter is usually the strongest part of the year for Oracle earnings, but both sales of software licenses and cloud subscription revenue came in short of Street expectations.

That’s not a “thesis-changer,” as analysts at Deutsche Bank put it, but neither is it all that reassuring. The transition to subscriptions can be ugly, if only because of the way ORCL has to recognize revenue. The sale of a license to use ORCL software is recorded at all once, while subscription revenue is spread out over the length of the order.

Oracle Stock: A Buy on the Earnings Dip

Regardless of the accounting, the drop in Oracle stock showed that Oracle earnings were met with a collective thumbs down.

For the most recent period, ORCL said net income fell to $3.6 billion, or 80 cents per share, compared with $3.81 billion in the same quarter a year ago. (Earnings per share remained unchanged year-over-year because of share buybacks.) On an adjusted basis (which is what analysts care about), EPS came to 92 cents, well short of the Street forecast for 95 cents. Revenue rose to $11.32 billion from $10.95 billion, but analysts modeled a top line of $11.48 billion.

Software license revenue was flat year-over-year, while revenue from the ORCL cloud businesses increased 22% to $450 million. The good news is that the cloud business is growing fast. The less-good news is that it’s still small, accounting for roughly 4% of total revenue.

Given the internals of the revenue miss, the Street may need to recalibrate its expectations for the ORCL strategic shift — but it shouldn’t lose faith in the effort altogether.

The shift to subscription revenue is clearly the right direction for the company and will help ORCL stock probably sooner rather than later. After all, lost in the Oracle earnings report was a fairly bullish forecast for the current quarter.

Another reason to be bullish on Oracle stock through its tumultuous transition is that, with the exception of a few brief selloffs, the market has been so supportive of it. Indeed, Oracle stock was up more than 11% for the year-to-date before the Oracle earnings faceplant. (ORCL stock is still up more than 5% this year.) And Oracle is still ahead by more than 25% over the last year.

If anything, this is probably a buying opportunity for Oracle stock, which was trading in line with its own historical earnings multiple before Friday’s selling, and now offers a slight discount.

This strategic change of course is bound to be unpleasant at times for anyone holding Oracle stock, but the chance for revenue gains and margin expansion going forward make ORCL worth the risk.

Besides, as Oracle’s Friday purchase of LiveLook proved once again, it can always crank up the M&A machine to patch any holes.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.