Larry Ellison, the co-founder of Oracle, engaged attendees during a recent press conference at the White House, offering a moment of levity as he spoke alongside former President Donald Trump. The event, part of an initiative to bolster artificial intelligence (AI) infrastructure, touched on various topics, including the January 6 Capitol riots, the ongoing war in Ukraine, and the evolving landscape of cryptocurrencies.
On the financial front, Oracle’s stock experienced a significant surge of 15% in a single day, reflecting the company’s strong earnings report and optimistic future outlook. This increase not only marked Oracle’s most substantial single-day gain since 2021 but also positioned the shares on course for a record closing price. The company’s fiscal fourth-quarter revenue climbed by 11% year-over-year, reaching $15.9 billion, a figure that surpassed analysts’ expectations, which averaged around $15.59 billion, according to data from LSEG.
Adjusted earnings per share for Oracle stood at $1.70, exceeding the consensus forecast of $1.64. This performance has prompted analysts, including those at Piper Sandler, to reassess Oracle’s valuation. They noted in a client communication that the company appears to be entering a new phase of enterprise appeal reminiscent of the tech boom of the late 1990s. Consequently, Piper Sandler raised its price target for Oracle stock from $130 to $190.
Oracle’s growth trajectory is increasingly attributed to its efforts in the competitive cloud infrastructure sector. While the company’s cloud revenue, which totaled $3 billion for the May quarter, still lags behind giants like Amazon, Google, and Microsoft—each commanding over $12 billion in cloud-related sales—its growth rate is gaining momentum. Analysts have highlighted Oracle’s ability to expand its offer, including deploying its database services across multiple cloud platforms beyond its proprietary system.
In a conference call with analysts, Ellison emphasized the remarkable shift towards multi-cloud usage. He suggested that this transition can be attributed to the enhanced capabilities of Oracle’s database system, particularly with the integration of advanced AI features, along with the flexibility now possessed by customers to utilize these services across various cloud environments. He accentuated the rapid movement of their database services to the cloud, attributing this to an increased demand for flexible and scalable solutions.
A critical metric for Oracle, the remaining performance obligations (RPO)—a forward-looking indicator of revenue—also displayed promising growth, rising 41% year-over-year to $138 billion. Oracle’s Chief Executive Officer Safra Catz projected that RPO could potentially more than double by the end of the fiscal year 2026, with expected revenues exceeding $67 billion, outpacing the consensus estimate of $65.18 billion.
The company is also exploring new growth avenues, notably through its involvement in OpenAI’s Stargate project, which aims to secure $500 billion in investments over a four-year span. Ellison indicated that gains from Stargate have not yet been factored into current forecasts. He described the potential for understated RPO growth should the project fulfill its ambitious objectives.
Despite this optimistic outlook, Oracle faces substantial challenges in meeting the surging client demand for cloud services. During the analysts’ call, Catz noted that the demand for Oracle’s cloud offerings continues to significantly outstrip supply. However, she reassured investors that the company currently does not face difficulties in procuring essential Nvidia graphics processing units, critical for supporting AI-related workloads.
In light of these developments, analysts at RBC maintained a cautious stance on Oracle’s stock, adjusting their price target from $145 to $195. They acknowledged the ongoing challenges posed by capacity constraints, which may inhibit any substantial acceleration in revenue growth in the immediate future. Such dynamics have drawn attention to the broader implications for the technology sector and the competitiveness of companies engaged in the cloud services arena.
In conclusion, Oracle’s performance reflects a notable resurgence in the enterprise technology sector, characterized by innovative developments and a strategic shift towards cloud services. The company’s robust financial results and ambitious projections suggest a pivotal moment in its corporate evolution, one that may redefine its role within the competitive landscape of global technology. As Oracle continues to navigate these challenges and opportunities, stakeholders across the industry will be closely watching its next moves and their potential impact on the market.