Oracle stock has expanded its gains. Increase revenue with AI.

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Oracle stock rose wider on Monday after Oracle’s enterprise software company reported better-than-expected quarterly earnings.

The stock, ticker: ORCL, rose 3.5% in after-hours trading. It closed 6.1% higher in normal trading on the day.

Leading up to the announcement, investors focused on the outlook for the company’s cloud business, which is being tailwinded by generative AI companies.

For the fourth quarter of the fiscal year ended May 31, Oracle reported revenue of $13.8 billion. It increased 17% as reported and 18% at constant currency. Oracle had expected currency-adjusted growth of 17% to 19%. Non-GAAP earnings were $1.67 per share, 10 cents above Wall Street consensus.

Performance was driven by cloud-related revenue growth of 54%, or 55% at constant currency, well above market expectations of approximately 50%. Based on generally accepted accounting practices, Oracle earned $1.19 per share for him. Oracle noted that unfavorable exchange rates reduced non-GAAP earnings by 3 cents per share.

Oracle said revenue from its cloud infrastructure business was $1.4 billion in the quarter, up 76% as reported, up 77% after adjusting for currency. Cloud applications revenue was $3 billion for him, and after adjusting for currency he was up 45% or 47%.

For the full fiscal year, Oracle posted record revenues of $50 billion. This was up 18% as reported, and he was up 22% at constant currency. The company said its cloud business combined grew 50% on a currency-neutral basis for the year. Oracle noted that its cloud infrastructure business in particular is accelerating.

Oracle recently announced that it has signed more than 30 AI development companies to jointly commit to purchase more than $2 billion in capacity in Oracle’s second-generation cloud. Oracle founder Larry Ellison specifically pointed out that the company has entered into a new partnership with AI software company Kohia to help customers build their own models while protecting their data.

For the first quarter of the fiscal year ending August, the company expects sales to grow 8% to 10%, compared with the expected 7.6% growth, and 7% to 9% at constant currency. slightly higher. The company expects earnings per share for the quarter to be between $1.12 and $1.16, in line with the $1.14 forecast. The company forecast cloud-based revenue growth of 28% to 30% for the quarter, excluding hospital and healthcare system provider Cerner, which may be slightly less than Oracle’s bulls expected.

CEO Safra Catz said on a conference call that the initial outlook for fiscal 2024 sees “unprecedented cloud demand,” and that cloud demand will be at least 2023 “despite a much higher base.” said to increase at the same rate as

“We are still in the beginning,” Katz added. The company remains committed to its previous forecast of achieving $65 billion in revenue by 2026, he said, adding that “AI demand leaves us with significant upside.”

Oracle

The company’s share price has surged in recent weeks amid growing views that its cloud business is well-positioned to benefit from the growth of the AI ​​trend. The stock is trading at an all-time high and today has surpassed the $300 billion market valuation. Oracle shares are up more than 30% since March.

The main thing that changed was that Oracle took a more aggressive approach to the cloud, first with its own software and then with the launch of Oracle Cloud. Barons It was mentioned in the February 2021 cover story and repeated in last October’s article, including an interview with CEO Safra Catz. Since then, the stock has risen 70%.

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

Nissan
,

mazda

—Why are they running all their high-performance work in the Oracle Cloud? Is it our charming bedside manor? Probably not. Is it because it’s faster, cheaper and safer? Ding, ding, ding! “

Oracle also leverages strong customer relationships, leading cloud platforms, and close relationships.

Nvidia

(NVDA) supplies chips to nearly every cloud vendor, making AI a surprisingly attractive area. Oracle announced today that Nvidia itself is using his cluster with over 4,000 GPUs.

Email Eric J. Savitz (eric.savitz@barrons.com).