AI Demand for Cloud Business, Oracle Stock Jumps on Earnings Beat

Database software giant Oracle ( ORCL ) posted better-than-expected quarterly earnings on Monday, with sales hitting the mark expected by analysts. Oracle stock jumped as the company said artificial intelligence is driving demand for its cloud computing business.




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Oracle reported Monday that it had an adjusted $1.41 per share on sales of $13.28 billion for the quarter ended February. On average, analysts anticipated that the Austin, Texas-based company would post adjusted earnings of $1.38. per share on sales of $13.28 billion, according to FactSet.

Adjusted earnings rose 16% year-over-year while sales rose 7% in the company’s fiscal 2024 third quarter.

In the stock market today, Oracle stock is up more than 9 percent at 125.05 in after-hours action.

Cloud backlog grows.

In a news release, Oracle Chief Executive Safra Katz cited a growing backlog for the company’s cloud-related services. The firm’s outstanding performance obligations rose 29 percent in the quarter, totaling more than $80 billion in backlogged work. This is an all-time record for the company, Katz said.

Oracle Cloud Infrastructure revenue rose 49 percent year over year to $1.9 billion in the February quarter, the company said. This marked stability for the business. Year-over-year sales rose 52% in the November quarter, 66% in the firm’s August quarter and 76% in the May quarter.

The cloud infrastructure business competes with Amazon Web Services and Microsoft Azure to rent computing power and storage to enterprises. Analysts see the offering as a potential growth driver for Oracle as companies adopt generative AI tools, which require massive amounts of data and computing power. But Oracle’s stock took a big hit late last year as sales for its cloud infrastructure business slowed in the quarter after rising sales.

But the company said demand is strong. Katz cited the “huge new cloud infrastructure” contracts added by Oracle during the most recent quarter as evidence.

“We expect to win large contracts securing cloud infrastructure capacity as demand for our Gen2 AI infrastructure significantly exceeds supply — despite the fact that we are expanding our new cloud data base,” Katz said in a news release. Centers are opening and expanding very quickly,” Catz said in a news release.

The firm expects 43 percent of the $80 billion in performance obligations to be recognized as revenue over the next 12 months.

Oracle Stock: Technical Ratings

Before earnings, Oracle closed up 1.5% at 114.12 in Monday trading. Shares have gained 10 percent this year and are up 34 percent. In the last 12 months. But Oracle stock fell after its two earnings reports earlier Monday. That left shares about 10% below the six-month high of around 130 reached in September by Monday’s close.

Meanwhile, IBD Stock Checkup shows that Oracle has such a comprehensive rating of 69 out of the best possible 99 in its earnings report. The ranking means that Oracle stock currently outperforms 69% of all stocks based on fundamental and technical stock picking criteria.

Also, stocks have a relative strength rating of only 50 out of 99. The RS Score measures how a stock’s price performance over the past 52 weeks has held up relative to other stocks in IBD’s database.

According to the IBD MarketSurge chart, Oracle shares have formed a bullish pattern over the past 38 weeks. The pattern shows a 127.54 buy point.

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