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Oracle Shares Surge 10% on AI Deals

Oracle's shares skyrocketed 10%, driven by new AI deals with Google and OpenAI, investors excited about its future
June 13, 2024

Oracle’s shares soared over 10% on Wednesday, following the release of its fourth-quarter results and the announcement of significant cloud partnerships with Microsoft-backed OpenAI and Google. This surge reflects the growing confidence in Oracle’s strategic direction and its position in the rapidly evolving AI and cloud computing markets.

The software giant reported $14.29 billion in revenue for the quarter, marking a 3% year-over-year increase. Although this figure fell slightly short of the $14.55 billion anticipated by analysts from LSEG, Oracle’s adjusted earnings per share of $1.63 were just below the expected $1.65. Despite these minor misses, the company showcased a strong performance in other areas.

One of the standout figures was Oracle’s $98 billion in remaining performance obligations (RPO), representing the future revenue expected from existing contracts. CEO Safra Catz highlighted that the demand for Oracle’s cloud services, particularly for training artificial intelligence models, drove substantial sales in the third and fourth quarters.

Oracle’s strategic moves include new cloud deals aimed at bolstering its AI capabilities. The company is collaborating with Microsoft and OpenAI to provide additional computing capacity for AI initiatives. Additionally, Oracle announced the integration of its database services with Google Cloud, further expanding its cloud ecosystem.

Analysts have offered a mixed but generally positive outlook on Oracle’s recent performance. Citi analysts acknowledged the company’s slower revenue growth but emphasized the impressive $98 billion backlog as a positive indicator for future revenue streams. UBS analysts pointed to the remarkable $18 billion sequential backlog growth as a highlight, even though some key metrics were missed. They emphasized that the narrative surrounding Oracle’s AI capabilities is becoming a significant driver of investor sentiment.

Morgan Stanley analysts echoed this sentiment, noting that while the quarter’s results were mixed, the momentum driven by Oracle’s AI initiatives and the addition of high-profile customers like OpenAI are likely to sustain the company’s share growth. They did, however, raise questions about the long-term implications of these contracts on Oracle’s gross margins.

Oracle’s strategic focus on AI and cloud computing is clearly resonating with investors. The company’s partnerships with industry leaders like Microsoft and Google not only enhance its technological capabilities but also position it as a key player in the next wave of AI development. As the demand for AI infrastructure continues to grow, Oracle’s impressive bookings and strategic alliances are likely to keep it in the spotlight.

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