Oracle Stock Soars on OpenAI, Google Deals, Strong Outlook
Oracle stock is trading higher as the software firm's new AI deals and upbeat outlook offset an earnings miss. Here's what you need to know.
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Oracle (ORCL) stock jumped nearly 12% out of the gate Wednesday after the software giant announced artificial intelligence (AI) partnerships with OpenAI and Alphabet's (GOOGL) Google, which helped offset a top- and bottom-line miss for its fiscal fourth quarter.
In the three months ended May 31, Oracle's revenue increased 3.3% year-over-year to $14.3 billion, driven by a 9.2% rise in its Cloud Services & License Support segment to $10.2 billion. The company said earnings per share (EPS) declined 2.4% to $1.63 from the year-ago period.
The results were less than encouraging and came in below analysts' estimates. According to CNBC, Wall Street was anticipating revenue of $14.55 billion and earnings of $1.65 per share.
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However, the double miss was overshadowed by comments from Oracle CEO Safra Catz, who said she expects "strong AI demand" to fuel "double-digit revenue growth this fiscal year." Additionally, in two separate press releases, Oracle disclosed partnerships with Open AI and Google Cloud.
"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 a statement. "In Q4 alone, Oracle signed over 30 AI sales contracts totaling more than $12.5 billion – including one with Open AI to train ChatGPT in the Oracle Cloud."
The deal with OpenAI will extend Microsoft's (MSFT) Azure platform to Oracle Cloud Infrastructure (OCI). This will give OpenAI additional capacity, Oracle said.
"The race to build the world's greatest large language model is on, and it is fueling unlimited demand for Oracle's Gen2 AI infrastructure," said Larry Ellison, chief technology officer and chairman of Oracle. "Leaders like OpenAI are choosing OCI because it is the world's fastest and most cost-effective AI infrastructure."
Meanwhile, the partnership with Alphabet will bring Oracle's database to Google Cloud later this year. The move will allow customers to combine Oracle and Google Cloud technologies to accelerate their application migrations and modernization without facing data transfer charges.
"Customers want the flexibility to use multiple clouds," Ellison said in a statement. "To meet this growing demand, Google and Oracle are seamlessly connecting Google Cloud services with the very latest Oracle Database technology. By putting Oracle Cloud Infrastructure hardware in Google Cloud datacenters, customers can benefit from the best possible database and network performance."
Is Oracle stock a buy, sell or hold?
"Oracle is one of the world's largest and most profitable software companies," says UBS Global Research analyst Karl Keirstead, who adds that the company's earnings report shows "the AI narrative is powerful."
Keirstead has a Buy rating on the tech stock and lifted his price target to $160 from $150 after earnings.
The UBS analyst finds himself in good company with his bullish outlook toward the blue chip stock, too. According to S&P Global Market Intelligence, the consensus analyst target price for ORCL stock is $143.92, representing implied upside of about nearly 5% to current levels. Additionally, the consensus recommendation is Buy.
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