Palantir shares rise 5% premarket as AI-fueled demand powers annual guidance raise
On Wednesday, Oracle Corporation’s shares rose following a positive assessment by Bernstein analysts who expressed increased confidence in the company’s cloud prospects. Oracle was highlighted as being on the right side of the cloud transition, with expectations for future growth, particularly from Oracle Cloud Infrastructure (OCI).
Bernstein’s latest report on hyperscale cloud performance for Q4 2024 indicates that cloud optimization is no longer impeding growth, and the emergence of Generative AI is starting to yield revenue for major cloud service providers, including Amazon, Google, and Microsoft. While Amazon Web Services (AWS) and Google Cloud Platform (GCP) have shown acceleration, Microsoft’s Azure AI has seen strong growth at the expense of its non-AI services, which has disappointed investors.
Microsoft (NASDAQ:MSFT), with a price target (TP) of $511 and an ’Outperform’ rating, is recognized for its substantial investment in Azure and its AI capabilities. Despite Azure AI’s impressive 31% constant currency (CC) growth this quarter, Microsoft’s core Azure non-AI revenue fell short of expectations. The company has demonstrated its ability to lead in cloud and AI services, but now faces the challenge of reviving its non-AI Azure business.
Oracle (NYSE:ORCL), with a TP of $207, also holds an ’Outperform’ rating. Oracle CloudWorld’s recent updates to FY26 and FY29 guidance have bolstered investor confidence. Although OCI Gen 2’s revenue is smaller compared to other hyperscale cloud providers, it shows consistent traction and market share gains. Bernstein believes Oracle has technological advantages in AI training and inferencing, which could provide upside potential.
Amazon (NASDAQ:AMZN), with a TP of $275 and an ’Outperform’ rating, met Q4 growth expectations with a 19% year-over-year increase. The company’s overall revenue reached an impressive $638 billion in the last twelve months, with EBITDA of $120.5 billion demonstrating strong operational efficiency. The AI sector continued to grow at a triple-digit rate from a small base, and margins remained strong. According to InvestingPro analysis, Amazon maintains a moderate debt level with sufficient cash flows to cover interest payments, supporting its continued investment in AI and cloud infrastructure. AWS’s revenue outlook appears uneven, and a $700 million operating income hit from server depreciation could impact margins. Despite these challenges, AWS growth is expected to reaccelerate in the second half of 2025, with analysts maintaining a strong buy consensus and a potential upside of 40% from current levels.
Google (NASDAQ:GOOGL), with a TP of $200 and a ’Market-Perform’ rating, has seen its stock movements increasingly tied to Google Cloud’s performance. Despite a 30% year-over-year growth, the quarter-over-quarter deceleration has raised concerns about Google’s ability to gain market share against AWS and Azure. Google Cloud’s growth is attributed to new customer wins, especially those requiring AI infrastructure, and strong performance of its AI platform, Vertex (NASDAQ:VRTX) AI. Margins have modestly expanded, but continued AI investments may limit further growth.
Alibaba (NYSE:BABA), with TPs of US$165 and HK$161 and an ’Outperform’ rating, reported a 13.1% year-over-year growth in Alicloud revenue, with an improved adjusted EBITA margin of 9.9%. The growth is driven by a shift to higher-margin public cloud products and consistent triple-digit growth in AI-related products. Alibaba’s significant investment in AI over the next three years underscores the importance of AI to its overall strategy.
Bernstein’s report serves as a comprehensive analysis of the largest hyperscale cloud providers, offering insights into the current state of AI and its impact on cloud services, as well as the competitive landscape in this rapidly evolving market. For investors seeking deeper insights into Amazon’s financial health and growth prospects, InvestingPro offers exclusive access to detailed financial metrics, Fair Value calculations, and 12 additional ProTips. The platform’s comprehensive Pro Research Report provides actionable intelligence on Amazon and 1,400+ other top stocks, helping investors make informed decisions in this dynamic tech landscape.
In other recent news, Amazon.com’s autonomous vehicle division, Zoox, recalled 258 self-driving vehicles due to issues with the automated driving system that could cause sudden hard braking. Zoox has addressed the problem by updating the software on the affected vehicles. Separately, a U.S. District Judge dismissed a lawsuit against Amazon, which accused the company of misleading shareholders about its treatment of third-party sellers and capacity expansion plans. The dismissal, made with prejudice, prevents the plaintiffs from re-filing the lawsuit on the same claims.
Additionally, Applied Optoelectronics (NASDAQ:AAOI) announced a significant warrant agreement with Amazon, allowing Amazon to acquire up to 7.95 million shares, highlighting a strategic partnership in the high-speed transceiver market for AI applications. Analyst Mike Genovese from Rosenblatt maintained a Buy rating on Applied Optoelectronics, noting the deal as a major positive for the company. Meanwhile, Barclays (LON:BARC) reaffirmed its Equalweight rating for Fabrinet (NYSE:FN), maintaining a $245 price target, citing its direct relationship with Amazon Web Services for AI infrastructure projects. Fabrinet is expected to benefit from AWS’s shift away from certain suppliers due to geopolitical concerns, positioning itself for increased market share.
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