Oracle stock broke out in Wednesday trading with double-digits gains, as investors reacted to the company's fiscal fourth quarter earnings report. The database giant late Tuesday gave upbeat guidance and announced cloud partnerships with OpenAI, Microsoft and Alphabet owned Google.
The strong move higher came despite lighter-than-expected fiscal fourth quarter earnings and sales for Oracle. Investors instead focused on Oracle's commentary that it is seeing more demand than it can currently meet for its Oracle Cloud Infrastructure business, or OCI. That led the company to give better than expected sales growth guidance for fiscal 2025.
"Throughout fiscal year 2025, I expect continued strong cloud demand to push Oracle sales and (remaining performance obligations) even higher and result in double-digit revenue growth this fiscal year," Chief Executive Safra Katz told analysts late Tuesday. "I also expect that each successive quarter should grow faster than the previous quarter, as OCI capacity increases to meet demand."
OCI rents cloud computing servers and storage to enterprises. The business is a key part of Oracle's transition from legacy database provider to cloud services company and is thus closely watched by investors.
On the stock market today, Oracle gained 13% to close at 140.38. Shares broke out above a 132.77 buy point from a cup base, according to MarketSurge charts.
Oracle Stock: CEO Touts AI Demand
For its fiscal fourth quarter ending in May, Oracle posted adjusted earnings of of $1.63 per share from sales of $14.3 billion. On average, analysts were expecting the Austin, Texas-based company to post adjusted earnings of $1.65 per share on sales of $14.56 billion.
Adjusted earnings decreased 1% while overall revenue increased 3% year-over-year.
But bullish comments from Catz are likely helping Oracle stock, despite the Q4 miss.
"In Q3 and Q4, Oracle signed the largest sales contracts in our history—driven by enormous demand for training AI large language models in the Oracle Cloud," Catz said in the company's news release.
Investors Watching Oracle Cloud
Oracle's closely-watched cloud infrastructure business grew sales 42% year-over-year to $2 billion in the May ending quarter. While Oracle Cloud Infrastructure is a small percentage of the company's total sales, is a big part of the 46-year-old firm's long-term effort to compete with giants such as Amazon and Microsoft.
OCI is also central to Oracle's plan to win AI business. Artificial intelligence startups require vast amounts of computing power to train and run algorithms.
Catz noted that Oracle signed more than 30 AI-related sales contracts, totaling $12.5 billion, in its fiscal fourth quarter alone. That includes the deal to train ChatGPT models using Oracle Cloud when OpenAI needs "additional capacity." Otherwise, OpenAI relies on Microsoft Azure through a longstanding partnership.
One challenge for Oracle is building AI-capable data centers to meet demand. Oracle's remaining performance obligations, or contracted work, grew 44% year-over-year to $98 billion.
"We are working as quickly as we can to get cloud capacity built out," Catz told analysts.
The cloud backlog has the company confident it can accelerate sales growth for its next fiscal year, ending in May, to double digits. Analysts previously projected 8.5% sales growth for Oracle's May 2025 fiscal year, according to FactSet.
Azure, Google Partnerships For Oracle
Meanwhile, the deal with OpenAI extends an existing partnership between Oracle and Microsoft. As announced late last year, the deal allows Microsoft Azure customers access to Oracle's database technology through Microsoft's data centers.
"As this Azure/OCI cloud capacity becomes available to the large installed base of Microsoft and Oracle customers, it will turbocharge our cloud database growth," Larry Ellison, Oracle's chairman and chief technology officer, said in a statement.
Separately, Oracle announced a deal with Google that is similar to the one with Microsoft. The two companies will team-up to offer Oracle Database@Google Cloud, as announced Tuesday.
Ellison told analysts that the companies are recognizing that enterprise customers are already working across multiple cloud platforms and using a wide-range of cloud-based applications.
"So, it's very important, we think, that all the clouds become interconnected," Ellison said on the analyst call. "We're thrilled to have the connection with Microsoft and be building OCI data centers right inside of Azure... We're doing the same thing with Google. We would love to do the same thing with AWS."
Oracle Stock: Q4 Sales Miss
For its May-ending quarter, Oracle recorded a 9% year-over-year increase in sales related to cloud services and license support, totaling $10.2 billion for the quarter. But that was partially offset by a 15% decline in cloud license and on-premise license revenue, to $1.8 billion.
The slower than expected sales comes amid a rough patch for software stocks. A list of companies that includes Salesforce, Workday and database competitor MongoDB suffered steep slides late last month after earnings reports that disappointed.
Still, Oracle investors appear more focused on it potential for cloud growth and backlog of work.
"Indications for the future (what stocks are valued on) are bright," as Guggenheim analyst John DiFucci wrote to clients following Oracle's Q4 report Tuesday.
Guggenheim rates Oracle stock a buy.
Oracle Stock: OpenAI Deal A 'Key Win'
Evercore ISI analyst Kirk Materne, meanwhile, said there are "always some moving parts" with Oracle's earnings reports. But the results appear positive for investors bullish about growth for Oracle's cloud infrastructure business.
"The announcement that OpenAI will also be using Oracle's infrastructure is a key win in terms of Oracle's credibility as an infrastructure platform in an AI world," Materne wrote in a Tuesday client note. Materne rates Oracle stock a positive outperform.
Still, other Oracle stock watchers were more cautious. Jefferies analyst Brent Thill rates Oracle stock a buy but had a warning regarding the company's new partners.
"We do not believe these AI demand-driven partnerships will last forever given Microsoft and Google want to gain share of Oracle's on-premise private data," Thill wrote to clients. "Hence, we believe the big winner will be Microsoft and Google long-term, not Oracle. That said, we see Oracle benefiting in the near term as it rents out the 'picks and shovels' needed for AI."
With Wednesday's jump, shares for Oracle have gained 34% overall this year, outpacing a 13.6% gain for the S&P 500. Oracle stock also gapped up after reporting better-than-expected fiscal third quarter earnings in March.
