Powered by growing expectations that Oracle’s cloud infrastructure business will benefit from increased AI workloads;
Oracle will report results for the August quarter after the close on Monday. (One of Oracle’s most underappreciated things is that they can close the books faster than any other tech company—in this case, 11 days after the end of the quarter.)
The company estimated constant currency revenue growth for the quarter between 8% and 10%, with a profit of $1.12 to $1.16. Oracle expects 28% to 30% of cloud-based revenue in the quarter, excluding its acquisition of healthcare IT company Cerner.
Street consensus estimates call for August quarter revenue of $12.4 billion, an 8.8% increase from a year ago, on adjusted profit of $1.15.
Street estimates for the November quarter call for revenue of $13.3 billion, up 8% from a year ago, on an adjusted basis of $1.34 a share.
On the company’s last earnings call, CEO Safara Katz said an early reading for Oracle’s May 2024 fiscal year is for unprecedented cloud demand, with growth equal to or better than 2023.
The company continues to migrate legacy customers to cloud-based versions of both its core database software and enterprise applications, including NetSuite and Fusion. But Oracle’s story continues to be driven by Oracle Cloud—known as OCI—and the company’s role in AI. Among other things, he benefited from a strong relationship with
Nivea
(NVDA), has given Oracle a generous allocation of GPU chips that it uses to provide AI computing services to customers.
“Our checks remain very bullish on OCI’s demand trends,” TD Cowen analyst Derek Wood said in a research note previewing the quarter. “The stock has moved a good deal this year, but we still think OCI’s story is underappreciated.” Wood on Oracle shares It maintains an Outperform rating and a $137 target price.
Guggenheim analyst John Diffucci is similarly bullish. He maintains a Buy rating and a $150 target on the stock. As DiFucci noted, the company had previously forecast sales of $65 billion by fiscal 2026. DiFucci says Street skepticism about Oracle’s ability to hit that target has faded, and he expects the company to reiterate the target at an analyst meeting scheduled for Sept. 21 in Las Vegas.
DiFucci said Oracle was his best bet based on the company’s migration of applications to the cloud, adoption of OCI as an alternative to other cloud providers, and migration of its database business to the cloud. “The first is in progress with many more episodes to go, the second is still in its infancy, and the third is still in its infancy,” he wrote.
Brian White, an analyst at Monas Crespi Hardt, says most software vendors have yet to show much of an AI trend, despite all the hype — but he adds that Oracle is different. In the May quarter call, Oracle wrote that it has signed more than $2 billion worth of OCI contracts with General AI customers. “Oracle shines” on training large linguistic models. White maintained a buy rating and a $140 target price on the stock.
Write to Eric J. Savitz at [email protected]
