Oracle Has Spoken: The AI Cloud Is Bigger And Growing Faster Oracle blew past estimates due to AI-based demand and sparked analysts' upgrades that will drive it to a new all-time high.

By Thomas Hughes

This story originally appeared on MarketBeat

Oracle stock price forecast

In the words of Oracle (NASDAQ: ORCL) CEO Safra Catz, "Both of our two strategic cloud businesses are getting bigger—and growing faster. That bodes well for another strong year in FY24." That bodes well for all of tech because the AI revolution supports this growth. If you ever wonder where AI lives, it's in the cloud because that is the only place to handle the data loads used to train the models and where the new data is being created. The point is that Oracle issued a game-changing report akin to NVIDIA's (NASDAQ: NVDA), and the stock is moving higher. What this means for investors is that tech stocks can continue to rally and may lift the S&P 500 over the summer.

Oracle Lifts Tech Stocks With Q4 Results, Outlook

Oracle had a solid quarter supported by the surge in AI demand. The company reported $13.84 billion in net revenue, a gain of 17% compared to last year. The revenue beat the Marketbeat.com consensus estimate by 80 basis points and came with a better margin than expected. The results are mixed on a segment basis, with Cloud Services and License Support up 23% YOY and Cloud License and Off-Premise License down 15%.

The mitigating factors are that legacy businesses are responsible for the weakness, and the growth drivers outperform at all levels. Within the Cloud Services and License Support segment, the cloud grew by 54%, led by IaaS. IaaS revenue grew by 76%, SaaS revenue by 44%, and Fusion ERP and NetSuite by 26% and 22%.

"Oracle's Gen2 Cloud has quickly become the number 1 choice for running Generative AI workloads," said Oracle Chairman and CTO, Larry Ellison. "Why? Because Oracle has the highest performance, lowest cost GPU cluster technology in the world. NVIDIA themselves are using our clusters, including one with more than 4,000 GPUs, for their AI infrastructure."

Margins expanded more than expected. The company's gross and operating margins expanded, leaving adjusted EPS at $1.67. This is up 27% compared to the top-line 17% and 560 basis points better than expected. The company doesn't give guidance but shows clear momentum. Mr. Ellison also says more than 35 AI development firms have signed contracts for billions in next-gen cloud capacity, a solid indicator of future business.

Analysts Push Oracle Into "Ballistic" Mode

The analysts have been bullish on Oracle's cloud business, increasing the market. That activity went into overdrive following the Q4 release and has the market on track to move virtually straight up in the near to short term. Three analysts boosted their price target days before the release, and 11 have been picked up in the first 18 hours since the release, and they are all above consensus.

The consensus is near $110 and suggests the market will move lower but is up 16% in the last 30 days, is lagging the market, and the range of new targets has the market trading between $130 and $150. That's a minimum of 12% upside on top of the post-release surge, which has the stock at a new all-time high.

The chart is favorable, but there is risk. Price action can't move vertically long, and resistance will eventually kick in. Investors looking to get into Oracle now face the risk of whipsaws and pullbacks. However, pullbacks that result in confirmed support should be viewed as potential entry points.

The growth of AI and the cloud supports the company's long-term outlook, including a sustainable dividend, dividend growth, and share repurchases. The stock only yields about 1.35% at current levels but has a healthy outlook for growth. The company is paying only 28% of the F24 consensus estimate (which is too low) and has been increasing for 8 years at a double-digit pace.

Oracle stock price chart

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Career

What Is 'Task Masking'? Young Workers Retaliate Against Return-to-Office Mandates With a Viral Strategy.

Many professionals value the flexibility of remote work — and they're not reacting well to forced in-office returns.

Business News

Delta Offers Plane Crash Survivors $30,000 Each With 'No Strings Attached'

The payment does not stop the passengers from filing lawsuits.

Thought Leaders

Are You Ready to Be a CEO, a Founder or Both? Here's How to Know

Every founder becomes a CEO, but not every CEO becomes a founder. There is a stark difference between the two. Here's how you know which one better suits you — or maybe you can be both.

Business Ideas

70 Small Business Ideas to Start in 2025

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2025.

Growing a Business

The Key to Better SEO Actually Comes From Your Customers — Here's How

Discover the difference user-generated content can make for SEO.

Business News

UnitedHealthcare Offers Employees Voluntary Buyouts to Meet 'Evolving Needs'

The health insurance giant could resort to layoffs if it doesn't meet resignation quotas with buyouts.