Oracle’s Stock Climbs After Google and OpenAI Deals, Despite Earnings Miss

Oracle Corporation‘s stock surged by as much as 11% in after-hours trading on Tuesday, following the company’s announcement of new cloud partnerships with tech giants Google and OpenAI. This rise came despite the company’s fourth-quarter financial results not meeting Wall Street expectations.

• Earnings Per Share: Oracle reported adjusted earnings of $1.63 per share, falling slightly short of the consensus estimate of $1.65.
• Revenue: Total revenue for the quarter stood at $14.29 billion, missing the forecasted $14.55 billion.

Oracle’s total revenue marked a 3% increase compared to the same period last year, as detailed in the company’s latest financial statement for the quarter ending May 31. However, net income decreased to $3.14 billion, or $1.11 per share, down from $3.32 billion, or $1.19 per share, in the previous year.

Revenue Breakdown by Segment

The cloud services and license support segment of Oracle’s business generated $10.23 billion in revenue. This represents a 9% increase, although it was slightly below the StreetAccount consensus of $10.29 billion. Meanwhile, the company’s cloud and on-premises licenses segment saw revenues decline by 15% to $1.84 billion, which was also lower than the expected $2.09 billion.

Revenue from Oracle’s cloud infrastructure reached $2.0 billion, growing by an impressive 42%. Despite this robust growth, the rate was a deceleration from the 49% growth observed in the prior quarter. Oracle’s cloud sector continues to expand, albeit at a smaller scale compared to competitors like Amazon Web Services and Microsoft Azure.

Future Earnings and Growth Projections

For the fiscal first quarter, Oracle anticipates earnings per share in the range of $1.31 to $1.35 and projects revenue growth between 5% to 7%. This projection is slightly more optimistic than analyst expectations, which forecast $1.32 per share on an adjusted basis and revenue of $13.39 billion, indicating a 7.6% growth.

Strategic Partnerships

Oracle announced a significant partnership with Google Cloud. Starting in November, Oracle will integrate its database services into Google’s cloud, allowing organizations to deploy workloads across both Google and Oracle cloud data centers without incurring data-transfer charges. This move follows a similar strategy with Microsoft last September, enabling clients to utilize Oracle database services from the Azure cloud.

Clay Magouyrk, Oracle’s Executive Vice President of Cloud Infrastructure, commented on the strong adoption of Oracle’s database on these platforms. Larry Ellison, Oracle’s Co-Founder and CTO, expressed interest in expanding these services to Amazon Web Services in the future.

Oracle’s partnership with OpenAI, along with Microsoft, aims to enhance Azure AI’s computing capacity. Despite OpenAI utilizing Microsoft as its exclusive cloud provider, Oracle’s infrastructure, including Nvidia GPUs, will support OpenAI for certain needs like inference. OpenAI clarified that the pre-training of its models would continue on Microsoft’s supercomputers.

Ellison highlighted Oracle’s ongoing efforts to expand its data center capacity to accommodate new workloads from partnerships like those with OpenAI. The company is constructing some of the world’s largest data centers, nearing capacities comparable to a gigawatt.

Oracle also disclosed its exit from the advertising business, where revenue had dwindled to approximately $300 million during the fiscal year. The company had previously spent billions acquiring marketing companies but saw only modest growth in this sector recently.

Oracle’s Stock Performance

Despite the mixed financial results, Oracle’s stock has increased by 18% year-to-date, outperforming the S&P 500 index, which rose about 13% over the same period.

With these strategic moves, Oracle continues to position itself as a significant player in the cloud services market, expanding its reach and capabilities through partnerships and infrastructure development. The company’s ability to adapt to the rapidly evolving tech landscape will be crucial as it seeks to compete more directly with established players in the cloud computing space.

• New cloud partnerships with Google and OpenAI.
• Expansion of Oracle’s database services to additional Azure regions.
• Introduction of generative AI features in Oracle’s Fusion cloud applications for various business functions.

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