Oracle will look to build on a strong 2024 when the database software giant reports earnings next week. Oracle stock investors are keyed in on whether the company can keep momentum growing for its push to offer cloud services.
Shares of the 47-year-old company have gained more than 30% this year, helped by the growth of its Oracle Cloud Infrastructure business. OCI offers cloud-based servers, storage and other computing services to other businesses. It is a key part of a long-running transition for Oracle from an on-premises software provider to a subscription-based cloud firm.
The Sept. 9 earnings report comes the day before Oracle's annual CloudWorld conference in Las Vegas, where analysts are expecting new announcements for OCI and other parts of the business.
Here is what to know ahead of next week's fiscal first quarter report:
Oracle Stock: Q1 By The Numbers
For Oracle's quarter ended Aug. 31, analysts polled by FactSet are expecting the company's adjusted earnings to grow 12% year over year to $1.33 per share. Revenue is forecast to increase 6.3% year over year to $13.2 billion.
"We believe Oracle should exceed estimates driven by OCI strength, offset by (software-as-a-service) and license weaknesses," Mizuho analyst Siti Panigrahi wrote to clients Tuesday. "Fiscal year 2025 consensus estimates appear conservative, as Oracle should benefit from AI capacity buildouts, (database) migration with multi-cloud partnerships, and recovery in Cerner."
Panigrahi rates Oracle stock a buy, with a price target of 170. He also expects Oracle will raise its fiscal year 2026 long-term guidance, which includes a revenue target of $65 billion.
Oracle's AI Push
Meanwhile, expect investors to pay close attention to the growth rate for OCI. Oracle's cloud infrastructure revenue increased 42% year over year to $2 billion for its May quarter. Sales jumped 49%, 52% and 66% in the quarters prior to that one.
The cloud infrastructure business competes against Amazon.com's Amazon Web Services and Microsoft Azure to rent computing power and storage to enterprises.
Stocking up on high-powered chips from Nvidia, OCI has attracted AI-focused startups. Oracle Chief Executive Safra Catz told analysts in June that Oracle signed more than 30 AI-related sales contracts, totaling $12.5 billion, in its May quarter alone.
One challenge for Oracle is building AI-capable data centers to meet that demand. Oracle's remaining performance obligations, or contracted work, grew 44% year over year to $98 billion as of its May quarter.
The backlog growth and progress in booking startups were enough for investors to send Oracle stock 13% higher following its fiscal Q4 report in June. That was despite Oracle's overall revenue coming in slightly below expectations.
Evercore ISI analyst Kirk Materne told clients in a recent note that OCI revenue growth should again take center stage during the earnings call next week and the CloudWorld event.
"We would expect to hear that AI demand continues to trend higher and that their value proposition of security and partnerships are making them truly unique," Materne wrote. "We believe management will highlight the positive impact they are seeing from partnerships with Microsoft and Google, and why they are able to compete while they also collaborate."
Oracle Stock Forms Flat Base
With earnings coming up, MarketSurge shows that Oracle stock has formed a flat base pattern and is approaching a buy point of 146.59. In June, Oracle stock broke out above a 132.77 buy point from a cup base, according to MarketSurge.
Shares have gained 34% this year and 18% in the past 12 months.
Meanwhile, Oracle stock has an IBD Composite Rating of 76 out of 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
Further, Oracle's IBD Relative Strength Rating is 84 out of 99. The RS Rating means that Oracle has outperformed 84% of all stocks in IBD's database over the past year.
