Oracle Shares Soar as AI Surge Boosts Cloud Demand!

On Tuesday, Oracle’s stock experienced a massive surge, climbing more than 11% to reach $156.34.

This gain came on the back of fiscal first-quarter results that exceeded expectations and the announcement of a new strategic partnership with Amazon.com’s (AMZN) Amazon Web Services (AWS).

I’ll take Oracle’s success with AI in cloud services as a sign that innovation is still possible, unlike the decline I see in the US manufacturing sector.

— Dr. Richard Moore (@richnanophd) September 10, 2024

Oracle reported adjusted earnings of $1.39 per share on $13.3 billion in sales for the August-ended quarter, surpassing analysts’ projections of $1.33 per share on $13.2 billion in sales.

The company’s sales increased by 7% year-over-year, while earnings grew by 17%. Oracle’s CEO, Safra Catz, emphasized that as cloud services became Oracle’s largest business, “both our operating income and earnings per share growth accelerated.”

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The rise in Oracle’s stock price was further bolstered by the performance of its cloud infrastructure business, which saw revenue grow 45% to $2.2 billion.

This represented a slight acceleration from the previous quarter’s 42% year-over-year increase. Oracle also secured 42 new cloud contracts for graphics processing units (GPUs) worth a total of $3 billion.

These GPUs are essential for the training and production of AI models, and Oracle is constructing a data center featuring “acres of Nvidia (NVDA) GPU Clusters for training large-scale AI models,” according to Larry Ellison, Oracle’s Chairman and Chief Technology Officer.

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The company’s remaining performance obligations (RPO), or contracted work, increased by 53% year-over-year to $99 billion, indicating strong momentum for Oracle Cloud and its AI initiatives.

This large booking number has led analysts like Barclays’ Raimo Lenschow to remain optimistic about Oracle’s growth prospects, suggesting it could accelerate revenue this year and next. Lenschow rates Oracle stock as “positive overweight.”

Looking ahead, Oracle’s long-term fiscal year 2026 guidance includes a revenue target of $65 billion. During a call with analysts, Catz reiterated expectations for double-digit revenue growth for Oracle’s fiscal 2025, ending in May. The company also reported a 6% growth in sales for fiscal 2024.

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The “biggest news of all” from Oracle’s earnings release, as described by Catz, is the multi-cloud agreement with AWS, the largest provider of cloud servers by market share.

This partnership will allow Oracle to integrate AWS services with its latest Oracle Database technology, including the Oracle Autonomous Database.

The agreement with AWS follows similar deals Oracle has signed with Microsoft (MSFT) and Google Cloud parent Alphabet (GOOGL) in the past 12 months.

The collaboration between Oracle and AWS marks a notable shift, given the historically competitive nature of the relationship between the two companies, highlighted by public spats between Ellison and Amazon CEO Andy Jassy.

Despite this, both companies appear to be setting aside their differences to offer Oracle Database@AWS. Ellison and AWS Chief Executive Matt Garman will discuss the partnership further at Oracle’s annual CloudWorld event in Las Vegas.

Oracle’s stock, before this report, had declined by 1.4% to $139.89 in regular trading. However, MarketSurge data shows that Oracle’s stock has now broken out past a flat base pattern with a buy point of $146.59, marking the second breakout in four months.

In June, Oracle’s stock broke out above a $132.77 buy point from a cup base following its fiscal Q4 earnings report.

Oracle shares have gained 51% year to date, outperforming the 15% gain for the S&P 500. Over the past 12 months, Oracle’s 27% gain has also outpaced the S&P 500’s 22.5% rise.

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Oracle’s IBD Composite Rating stands at 81 out of 99, indicating that the stock combines strong ratings across multiple growth metrics.

Additionally, Oracle’s IBD Relative Strength Rating is 86 out of 99, meaning the company has outperformed 86% of all stocks in the IBD database over the past year.

Oracle’s Cloud Infrastructure has shown substantial growth, with revenue rising 45% to $2.2 billion in the August quarter, continuing a trend of increasing demand for AI-related services and cloud solutions.

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This growth has been supported by Oracle’s strategic partnerships with major cloud providers, including AWS, Microsoft, and Google Cloud, which are critical for expanding its cloud and AI capabilities.

The new AWS partnership, in particular, allows Oracle to connect its database technology seamlessly with AWS services, providing greater customer flexibility.

Analysts remain bullish on Oracle’s future, with strong RPO growth and a target for double-digit revenue growth for fiscal years 2025 and 2026.

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Oracle’s positive outlook is reflected in its strong stock performance and ratings, reinforcing its position as a key player in the rapidly growing cloud and AI markets.