Oracle Corporation experienced a remarkable 13% surge in its stock price on Wednesday, marking its best trading day since December 10, 2021. This significant uptick followed the announcement of its fourth-quarter financial results and new cloud partnerships with industry leaders OpenAI, backed by Microsoft, and Google.
The software giant reported a quarterly revenue of $14.29 billion, reflecting a 3% increase year over year. Despite this growth, the figure fell short of the $14.55 billion anticipated by analysts, according to LSEG. Oracle’s adjusted earnings per share (EPS) were $1.63, slightly below the expected $1.65.
A standout figure in Oracle’s report was its $98 billion in remaining performance obligations (RPO), which signifies the revenue expected from existing contracts in future quarters. CEO Safra Catz highlighted that significant sales contracts, primarily driven by the demand for Oracle’s cloud services to train AI models, were signed during the third and fourth quarters.
Oracle’s announcement included strategic collaborations with major players. The company will partner with Microsoft and OpenAI to provide additional computing capacity for AI development. Furthermore, Oracle will extend its database services to Google Cloud, enhancing its cloud capabilities and market reach.
Analysts provided mixed reactions to Oracle’s financial performance. Citi analysts noted the sluggish revenue but emphasized the “tremendous RPO bookings growth.” Despite acknowledging the substantial $98 billion backlog, they expressed a desire for clearer indications of how this backlog will convert into actual revenue.
UBS analysts pointed to the “extraordinary sequential backlog growth of $18 billion” as a key highlight, acknowledging that while some critical metrics were missed, the overarching AI narrative significantly bolstered investor sentiment. UBS maintained its buy rating on Oracle’s stock, underlining the positive impact of the company’s strategic direction.
Morgan Stanley analysts echoed a mixed sentiment, acknowledging that the near-term focus on AI infrastructure build-out would likely sustain the positive momentum in Oracle’s shares. However, they raised longer-term concerns about the nature of Oracle’s contracts and the potential implications for gross margins.