Oracle, surprisingly, has emerged as one of the biggest winners in this year’s investor craze for artificial intelligence (AI) stocks. With growing expectations for its Oracle Cloud Infrastructure business and its potential in generative AI workloads, Oracle stock (ticker: ORCL) has skyrocketed by over 50% this year. Even outperforming Microsoft (MSFT), which is widely regarded as a prominent player in AI, by an impressive margin of 10%.
Strong Quarter Results Expected
Oracle is set to announce its August quarter results after the market closes on Monday. What often goes unnoticed is Oracle’s remarkable ability to swiftly close its books, outpacing other tech companies with a mere 11 days after the end of the quarter.
The company forecasts a constant currency revenue growth rate of 8% to 10% for the quarter, with an anticipated profit range of $1.12 to $1.16 per share. Oracle expects cloud-based revenue, excluding its acquisition of the healthcare IT company Cerner, to account for 28% to 30% of the quarter’s revenue.
According to street consensus estimates, the August quarter revenue is projected to reach $12.4 billion, marking an increase of 8.8% from the previous year, along with an adjusted profit of $1.15 per share.
November Quarter Outlook
Looking ahead to the November quarter, analysts expect revenue of $13.3 billion, a growth of 8% compared to the previous year, and an adjusted profit per share of $1.34.
During the company’s previous earnings call, CEO Safra Catz expressed her early observations for Oracle’s fiscal year in May 2024. She expects an unprecedented demand for cloud services, with growth on par or even surpassing that of FY 2023.
Oracle Embraces the Cloud and AI
Oracle remains committed to transitioning its legacy customers to cloud-based versions of its flagship database software and enterprise applications, such as NetSuite and Fusion. However, the company’s narrative is primarily driven by Oracle Cloud—also known as OCI—and its role in the field of AI. Notably, Oracle has benefitted from a strong partnership with Nvidia (NVDA), which has granted them an ample allocation of GPU chips. These chips enable Oracle to provide AI computing services to their customers.
In conclusion, Oracle has become an unexpected victor in the AI stock frenzy, capitalizing on its Oracle Cloud Infrastructure business and the potential it holds for generative AI workloads. We eagerly await the release of Oracle’s impressive quarterly results and anticipate their continued success in the ever-evolving world of cloud computing and AI.
OCI Demand Trends Remain Bullish, Analysts Say
In a research note previewing the quarter, TD Cowen analyst Derrick Wood expressed his confidence in OCI demand trends, stating that the OCI story is still underappreciated despite the significant movement in shares this year. Wood maintains an Outperform rating and a $137 target price on Oracle shares.
Similarly, Guggenheim analyst John DiFucci is also bullish on Oracle. DiFucci maintains a Buy rating and has set a target of $150 for the stock. He references the company’s previous forecast of reaching $65 billion in sales by fiscal 2026 and believes that Street skepticism about Oracle’s ability to hit that target has diminished. DiFucci expects the company to reiterate its target at an upcoming meeting with analysts scheduled for Sept. 21 in Las Vegas.
DiFucci argues that Oracle remains his best idea due to the company’s cloud transition for applications, the adoption of OCI as an alternative to other cloud providers, and the ongoing transition of the database business to the cloud. He notes that the first transition is already underway with plenty of room for growth, the second is still in its early stages, and the third is just beginning.
Analyst Brian White from Monness Crespi Hardt remarks that many software vendors have yet to deliver on the AI trend, despite all the hype. However, he believes Oracle is different. White points out that Oracle disclosed on the May quarter call that it had signed OCI contracts with Gen AI customers worth over $2 billion. He praises Oracle’s prowess in training large language models and maintains his Buy rating with a $140 target price on the stock.
Eric J. Savitz from s.com