Oracle Corporation saw a significant increase in its share price after the company reported first-quarter results that significantly exceeded analysts' expectations. * Earnings growth and increased order volume point to the demand for AI continuing to strengthen the tech company's cloud services segment, and we will focus on all the key factors in this blog. that contribute to Oracle's success, as well as how you can leverage the company's fundamentally strong situation to your advantage.
Strong profit and sales growth exceeds expectations
Oracle reported earnings of $1.39 per share (excluding one-time items), beating analyst estimates of $1.33 per share. * Revenue rose 7% to $13.3 billion for the quarter ended August 31, in line with expectations. CEO Safra Catz said that the increase in cloud services revenue has become the biggest driver for the growth of operating profit and earnings per share, underscoring the company's successful shift to cloud technologies.
The company, which is primarily known for its database software, is actively expanding its cloud infrastructure business to better compete with dominant market players such as Amazon Web Services (AWS), Microsoft Azure and Google Cloud. The company is also building a reputation for generative AI, citing customers such as Reka and Elon Musk's xAI who are actively using its services.
New partnerships and modernization of the database segment
The report also announced a new agreement with Amazon Web Services that will allow Oracle databases to be offered on the AWS platform. The company already has similar agreements with Microsoft and Google, which analysts see as a step towards modernizing Oracle's database business, which is currently largely dependent on on-premises solutions.
Overall, cloud revenue grew 21% to $5.6 billion, of which $2.2 billion was compute and storage rentals. The company also reported a total order volume of $99 billion, indicating strong interest in its cloud solutions. In a conference call after the results were announced, Safra Catz emphasized that the growth in order volume was due to several large contracts concluded during the quarter.
Cloud Infrastructure Expansion
Oracle shares hit new all-time highs, rising as much as 15% on Tuesday morning in New York,[1] hitting an intraday high of $160.52. The company thus became one of the best-performing software stocks this year, with a rise in value of almost 50% after the close of the stock exchange on Tuesday. *
Oracle expects revenue to grow at a double-digit pace in the current fiscal year, higher than the analysts' average estimate of 9.4%. Safra Catz also said that revenue growth from cloud infrastructure will be even faster than in the previous fiscal year. Demand for cloud services is outpacing current supply, with Oracle intensively building new data centers to handle the growing computing power requirements for AI.
Capital expenditure, a key indicator of the company's investments, came in at $2.3 billion, below analysts' expectations of $3.04 billion. Oracle plans to double capital expenditures in the next fiscal year ending in May 2025, indicating continued growth and expansion of cloud infrastructure. [1]
Conclusion
Oracle is becoming one of the major players in cloud services, supported by strong demand for artificial intelligence and new strategic partnerships. Investors should see continued growth in this segment as a positive indicator of the future performance of the company's shares. With double-digit revenue growth expected and additional infrastructure investments, Oracle is poised for long-term success, creating an opportunity for investors looking to leverage their investment portfolio with the rapidly evolving cloud market. [2]
* Past performance is not a guarantee of future results
[1], [2] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or on the current economic environment, which is subject to change. Such statements are not a guarantee of future performance. They involve risks and other uncertainties that are difficult to predict. Results could differ materially from those expressed or implied in any forward-looking statements.
[1] Oracle's stock price performance over the past five years: https://tradingeconomics.com/orcl:us
