Street Calls of the Week
Investing.com - Oracle shares jumped by 35% in afternoon trading on Wednesday after the software company unveiled a blockbuster cloud revenue outlook, offsetting fiscal first-quarter results that fell short of estimates.
The spike gives Oracle a market capitalization of around $914 billion, putting it even closer to the heights of trillion-dollar companies like NVIDIA, Microsoft, and Apple. Year-to-date, the stock has now skyrocketed by over 100%, fueled by a boom in demand for artificial intelligence-driven cloud firms.
Remaining performance obligations, or RPO, Oracle’s most recognized measure of booked revenue, surged by 359% versus a year earlier to $455 billion in the quarter ended on August 31, far outpacing consensus expectations of $178 billion. CEO Safra Catz also predicted that “several additional multi-billion-dollar” clients will be signed in the next few months.
"RPO stole the show [...], reinforcing confidence in Oracle’s acceleration narrative," analysts at Jefferies said in a note.
Strategists at UBS added that "[t]he scale of the backlog -- [...] with $317 billion of deals added in [the fiscal first quarter] alone -- is so materially above Street estimates and drives such a material upward revision" to estimates for the firm’s 2028 fiscal year and beyond "that the stock deserves to re-rate materially higher, turning Oracle into perhaps the biggest large-cap growth acceleration story in all of tech."
Booked revenue at the Oracle Cloud Infrastructure (OCI) division is tipped to surpass half-a-trillion dollars, the company said -- a robust forecast which analysts said was a sign of solid demand for the group’s relatively low-cost, AI-powered offerings.
OCI revenue is also anticipated to grow 77% to $18 billion during the current fiscal year and then increase to $32 billion, $73 billion, $114 billion, and $144 billion over the subsequent four years.
In a note, the UBS analysts said this guidance, as well as Oracle’s projection for full-year capital spending of $35 billion, is "bullish" for semiconductor giant Nvidia (NASDAQ:NVDA), other AI hardware suppliers "and the eco-system of partners building and financing" Oracle’s graphics processing unit (GPU) data centers. GPUs can handle large amounts of data, making them an essential cog in the training and deployment of AI models.
Speaking in a post-earnings call, Catz noted that the firm has worked to make a range of popular AI reasoning models — such as OpenAI’s ChatGPT and xAI’s Grok — available to its customers.
Yet the group-wide fiscal first-quarter performance was more mixed. Adjusted earnings per share were $1.47 and revenue was $14.93 billion, compared with FactSet estimates of $1.48 a share and $15.04 billion.
(Yasin Ebrahim contributed reporting.)
*Oracle is part of our AI-picked list of stocks for September.
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