Oracle share price

Oracle’s Cloud Business Soars 33%: AI Demand Boosts Growth Amid Strong Quarterly Results

Oracle Corp. is riding high in 2024! The company has seen a massive 33% rise in its stock price this year, driven by soaring demand for its cloud computing services. With artificial intelligence (AI) fueling this growth, Oracle continues to expand its cloud infrastructure to meet the rising demand from companies across various industries. But what’s behind this incredible success? Let’s dive into Oracle’s latest quarterly results and explore how AI is transforming its cloud business.

Oracle’s Impressive Quarterly Results: A Breakdown

Oracle’s recent quarterly performance has exceeded Wall Street expectations, signaling strong growth in its cloud services and AI-driven business.

In the fiscal quarter ending on August 31, Oracle reported earnings of $1.39 per share, excluding certain items. Revenue for the quarter grew by 7% to $13.3 billion, matching analysts’ estimates of $13.3 billion in sales but beating profit expectations, which had been pegged at $1.33 per share.

Key Financial Highlights:

• Earnings per share (EPS): $1.39 (beating estimates of $1.33)
• Revenue: $13.3 billion (7% increase year-over-year)
• Cloud revenue: $5.6 billion (21% growth)
• Remaining performance obligation (RPO): $99 billion

According to Safra Catz, Oracle’s CEO, the company’s earnings per share and operating income have accelerated as cloud services became Oracle’s largest business segment. This reflects the growing demand for cloud infrastructure, particularly for AI workloads.

AI Is Powering Oracle’s Cloud Success

Artificial intelligence is playing a crucial role in Oracle’s cloud expansion. The company’s cloud platform has become known for its success in handling generative AI workloads, attracting high-profile customers like Elon Musk’s xAI and AI startup Reka.

Why AI Is a Game Changer for Oracle:

• Generative AI workloads: Oracle’s cloud infrastructure is highly optimized for running large-scale AI applications, which has given the company a competitive edge over rivals like Amazon, Microsoft, and Google.
• Cloud computing power: Oracle has positioned itself as a top choice for companies looking to leverage AI in their operations, providing powerful cloud computing and storage capabilities.

Oracle’s strategy to compete with the giants of the cloud world — Amazon Web Services (AWS), Microsoft Azure, and Google Cloud — is clearly paying off. Its ability to cater to the growing AI demands has put it in a strong position to capture more market share in the rapidly evolving cloud space.

Key Milestones: Oracle’s Cloud Partnerships

One of the most exciting developments in Oracle’s recent announcements is its new partnership with Amazon Web Services (AWS). Oracle’s flagship database will now be available on the AWS cloud platform, making it even easier for customers to integrate Oracle’s robust database offerings into their AWS environments.

This partnership is a significant move as Oracle has already struck similar deals with Microsoft Azure and Google Cloud. These collaborations are expected to modernize Oracle’s database business and provide a seamless experience for users across cloud platforms.

What This Means for Oracle:

• Oracle’s cloud offerings will become more accessible across platforms.
• This partnership enhances Oracle’s competitive stance against other cloud service providers.

Cloud Revenue Growth: Oracle’s Strongest Business Segment

Oracle’s cloud business continues to be the driving force behind its revenue growth. Cloud revenue for the fiscal quarter reached $5.6 billion, a 21% year-over-year increase. Of that, $2.2 billion came from renting computing and storage — a crucial component of Oracle’s cloud infrastructure business.

According to Safra Catz, Oracle’s cloud infrastructure revenue is expected to grow at a faster pace this fiscal year than in previous years, thanks to rising demand for AI computing power. The company is rapidly building new data centers to meet this need, and its current backlog of booked sales, or remaining performance obligation (RPO), stands at an impressive $99 billion.

What’s Driving Cloud Revenue?

• Rising demand for AI: AI-related workloads are pushing cloud infrastructure growth.
• Increased data centers: Oracle is investing heavily in building new data centers around the world to support cloud and AI growth.

Capital Expenditures and Investment in Data Centers

To support this surge in demand, Oracle has committed to doubling its capital expenditures by the end of the fiscal year ending May 2025. In the last quarter alone, Oracle spent $2.3 billion in capital expenditures, which includes investments in new data centers. This investment is crucial as Oracle continues to scale its cloud infrastructure to power AI applications and cloud services.

Larry Ellison’s Vision: Oracle Chairman Larry Ellison emphasized the importance of expanding the company’s global cloud infrastructure. Oracle now has 162 cloud data centers in operation or under construction worldwide, reflecting its aggressive expansion to meet growing demand for cloud computing.

Oracle’s Stock Performance: Outpacing the Market

Oracle’s stock performance has been one of the highlights of the year in the software sector. As of the close of trading, Oracle’s stock is up 33% for the year, making it one of the best-performing large software stocks in 2024.

After the quarterly results were announced, Oracle’s shares rose another 9% in extended trading, closing at $139.89 in New York. Investors are clearly bullish on Oracle’s future growth prospects, driven by its cloud business and AI capabilities.

Future Outlook: What’s Next for Oracle?

Oracle’s management is optimistic about the company’s future, with Safra Catz predicting double-digit revenue growth for the fiscal year ending May 2025. This forecast is higher than analysts’ average estimate of 9.4%. Oracle’s cloud infrastructure revenue, in particular, is expected to grow at an even faster rate than last year.

One of the biggest drivers for Oracle’s future growth will be its ability to keep up with the increasing demand for AI and cloud computing services. With new data centers being built at a rapid pace, Oracle is well-positioned to meet this demand and maintain its competitive edge in the cloud market.

Conclusion:

Oracle’s 2024 success is largely attributed to the growth of its cloud computing services, driven by AI-powered applications and strong partnerships with leading cloud platforms. With its investment in expanding data centers and a promising outlook for future growth, Oracle is well-positioned to maintain its momentum in the competitive cloud market.

FAQs:

1.Why is Oracle’s stock rising?

A. Oracle’s stock has risen 33% this year due to strong growth in its cloud business, driven by AI demand and partnerships with AWS, Microsoft, and Google.

2.What are Oracle’s quarterly earnings?

A. Oracle reported earnings of $1.39 per share and revenue of $13.3 billion for the fiscal quarter ending August 31, beating profit expectations.

3.How is AI impacting Oracle’s cloud business?

A. AI workloads are boosting demand for Oracle’s cloud services, particularly in generative AI, attracting high-profile customers like xAI and Reka.

4.What is Oracle’s cloud revenue growth?

A. Oracle’s cloud revenue grew by 21% year-over-year to $5.6 billion, with $2.2 billion coming from renting computing and storage.

5.What are Oracle’s future growth prospects?

A. Oracle expects double-digit revenue growth for the fiscal year ending in May 2025, with cloud infrastructure revenue projected to grow faster than in previous years.

6.How many cloud data centers does Oracle have?

A. Oracle currently operates or is constructing 162 cloud data centers around the world to support its growing cloud and AI services.

7.What is Oracle’s partnership with AWS?

A. Oracle recently announced a new agreement to make its database available on Amazon Web Services (AWS), expanding its cloud business and modernizing its offerings.

8.How much did Oracle invest in capital expenditures?

A. Oracle spent $2.3 billion in the last quarter on capital expenditures, mainly to build new data centers to meet the growing demand for cloud and AI services.

9.How has Oracle’s stock performed compared to the market?

A. Oracle’s stock has risen 33% this year, making it one of the best-performing large software stocks in 2024, with an additional 9% gain in extended trading after earnings.

10.What challenges does Oracle face in the future?

A. While Oracle is poised for growth, it faces the challenge of maintaining its competitive edge against cloud giants like Amazon, Microsoft, and Google.

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