Oracle stock soars on cloud growth, strategic AWS partnership, and robust earnings

Oracle Corporation’s stock has surged to a record high following a stellar earnings report and new strategic partnerships that signal a promising future for the tech giant. The company’s shares rose by more than 9% in extended trading, reaching $152.90, a new all-time high. This remarkable performance is fueled by three key factors: a robust earnings beat, accelerated cloud growth, and a game-changing partnership with Amazon Web Services (AWS).

Oracle’s Earnings Beat Fuels Investor Optimism

Oracle reported fiscal first-quarter earnings for 2024 that exceeded Wall Street expectations, driving its stock to new highs. The company’s revenue climbed by 7% year-over-year to $13.3 billion, surpassing analysts’ projections of $13.23 billion. Oracle’s earnings per share (EPS) jumped to $1.39, above the predicted $1.32, showcasing a strong financial footing. CEO Safra Catz emphasized that the company’s non-GAAP operating income rose by 14% in constant currency to $5.7 billion, while non-GAAP EPS increased by 18%. She attributed this performance to robust demand across Oracle’s business segments, particularly in cloud services.

Oracle’s remaining performance obligations (RPO), a measure of contracted revenue from services or products yet to be delivered, surged by 53% year-over-year to a record $99 billion. According to Jefferies analyst Brent Hill, this substantial growth in RPO is a crucial indicator of Oracle’s strong future revenue pipeline and one of the main reasons behind the recent stock gains.

Cloud Growth Accelerates as Demand for AI Infrastructure Increases

Oracle’s cloud business continues to be a major growth driver, with cloud services and license support revenue rising by 10% to $10.52 billion, exceeding expectations. Oracle’s cloud infrastructure revenue soared by 45% to $2.2 billion, marking an acceleration from the previous quarter’s 42% growth rate. This growth was driven by a surge in demand for AI and data processing solutions in the cloud, as more enterprises and startups turn to Oracle for their AI training needs.

Industry experts suggest that Oracle’s cloud growth is partly driven by its appeal to AI developers, who are increasingly choosing Oracle’s cloud infrastructure for their needs. Unlike some competitors who charge extra for AI capabilities, Oracle integrates these advanced features into its existing applications without additional costs, making it an attractive option for companies looking to leverage AI technologies.

Game-Changing Partnership with AWS Expands Oracle’s Cloud Footprint

A significant factor contributing to Oracle’s stock rally is its newly announced multicloud partnership with Amazon Web Services (AWS). This strategic collaboration will allow AWS customers to access Oracle’s database technology using AWS cloud data centers, making Oracle’s cloud services more accessible to a broader audience. The partnership is expected to generate substantial growth opportunities by leveraging AWS’s extensive cloud network. Oracle also expanded its cloud services’ availability on Microsoft Azure and Google Cloud, further strengthening its multicloud strategy and competitive position.

Oracle’s founder and Chief Technology Officer Larry Ellison emphasized the company’s commitment to expanding its cloud infrastructure. He revealed plans to build new, energy-efficient data centers, including one with an 800-megawatt capacity filled with Nvidia GPU clusters, widely used for training AI models. Ellison also discussed plans for facilities that could use modular nuclear reactors, highlighting Oracle’s focus on sustainable growth and innovation.

Expert Opinions: Oracle’s Future Looks Promising

Market analysts have been largely positive about Oracle’s future prospects. Brent Hill from Jefferies highlighted the 53% growth in Oracle’s backlog as a standout metric that indicates strong future demand. Meanwhile, Rebecca Wettemann from Valoir Research noted that Oracle’s unique approach to integrating AI capabilities within its cloud offerings without additional costs has given it a competitive edge. She emphasized that this strategy, coupled with its aggressive cloud expansion, positions Oracle well for continued growth in the highly competitive cloud market.

Looking Ahead: Steady Growth Expected

Oracle has provided an optimistic outlook for the next quarter, projecting revenue growth between 8% and 10%, aligning with analysts’ forecasts. The company anticipates earnings per share to range from $1.45 to $1.49, closely matching Wall Street’s expectations. With its robust cloud growth, strategic partnerships, and commitment to innovation, Oracle appears well-positioned to sustain its momentum in the coming quarters.