Oracle Stock Extends Its Rally. Revenues got a boost from AI.

For the fiscal fourth quarter ended May 31, Oracle reported revenue of $13.8 billion, up 17% as reported and 18% in constant currency. Oracle had forecast growth of 17% to 19% adjusted for currency. Non-GAAP profit was $1.67 per share, a penny above Wall Street’s consensus.

The results were driven by 54% growth in cloud-related revenue, or 55% in constant currency, well above Street estimates of around 50%. Under GAAP, Oracle earned $1[ads1].19 per share. Oracle noted that unfavorable exchange rates reduced non-GAAP earnings by three cents per share.

Oracle said its cloud infrastructure business in the quarter had revenue of $1.4 billion, up 76% as reported or 77% adjusted for currency. Cloud application revenue was $3 billion, up 45% or 47% adjusted for currency.

For the full fiscal year, Oracle had $50 billion in revenue, a record high, up 18% as reported or 22% in constant currency. The company said its combined cloud businesses grew 50% for the year in constant currency. Oracle noted that its cloud infrastructure business in particular has accelerated.

Oracle said it recently signed on more than 30 AI development companies, which together commit to buying more than $2 billion of capacity in Oracle’s Gen 2 cloud. In particular, Oracle founder Larry Ellison noted that the company has a new partnership with AI software company Cohere to help customers build their own models while protecting their data.

For the fiscal first quarter that ends in August, the company sees revenue up 8% to 10% — slightly above forecasts for 7.6% growth and 7% to 9% in constant currency. The company sees $1.12 to $1.16 per share in earnings for the quarter, in line with estimates of $1.14. The company estimates cloud-based revenue for the quarter excluding Cerner, a hospital and healthcare services provider, will rise 28% to 30%, which may be slightly less than what Oracle bulls expected.

CEO Safra Catz said on the call that her early reading of fiscal 2024 calls for “unprecedented cloud demand,” with cloud demand growing at least the same rate as in 2023, “although the base is much higher.”

Catz added, “We’re in the middle of the beginning.” She said the company remains committed to its previous forecast of $65 billion in sales by 2026. “AI demand gives us significant upside.”

Oracle shares have surged in recent weeks amid a growing view that the company’s cloud business is well-positioned to benefit from the growing AI trend. The stock is trading at an all-time high, today smashing through the market valuation level of $300 billion. Oracle shares have risen more than 30% since March.

What has mostly changed is Oracle’s aggressive push into the cloud, first with its own software and then with the launch of Oracle Cloud, which Barron’s noted in a February 2021 cover story and repeated in a story last October that included an interview with CEO Safra Catz. Since then, the stock has risen 70 percent.

“Customers who compare us to the other clouds are often stunned,” Catz said at the time. “Why do all these car companies—Toyota, Nissan
,

Mazda – why do they do all their high performance work in the Oracle Cloud? Is it our charming bedside manner? Probably not. Is it because it is faster, cheaper and safer? Ding, Ding, Ding!”

Oracle is also leveraging strong customer relationships, a cutting-edge cloud platform and a close relationship with Nvidia (NVDA), which supplies chips to nearly every cloud provider, to become a surprisingly compelling AI play. Oracle said today that Nvidia itself uses a cluster of more than 4,000 GPUs.

Write to Eric J. Savitz at eric.savitz@barrons.com