Source: PaxForex Premium Analytics Portal, Fundamental Insight
Oracle may not be the largest cloud services provider, but it's currently one of the fastest-growing. Traditionally known for database management, Oracle is now fully committed to expanding its cloud presence and catering to artificial intelligence (AI) clients. This strategy is paying off, with demand and cloud infrastructure revenue experiencing significant growth recently.
In its latest quarterly report, Oracle revealed a 42% rise in cloud infrastructure revenue, reaching $2 billion. The company also projected double-digit full-year revenue growth driven by the current AI demand. Oracle is clearly attracting customers, having secured its largest contracts ever in the past two quarters, and is proving it can compete with the bigger cloud service providers. Additionally, Oracle shared some potentially game-changing news for the company and its shareholders. Let's delve into it.
Oracle has been focusing on enhancing its cloud infrastructure and serving AI customers. This focus enabled the company to secure its largest sales contracts to date in the latest quarter, particularly from clients looking to train large language models. Oracle signed approximately 30 AI contracts valued at over $12 billion during the quarter.
This surge in demand is boosting Oracle's remaining performance obligation (RPO), the revenue expected from contracted services, which rose by 44% to $98 billion in the quarter. The company anticipates this momentum to persist, giving us reason to be optimistic about future revenue growth.
Now, let's examine the significant news that bolsters our optimism. Oracle announced two major AI deals with industry giants, underscoring its status among today's leading AI companies. OpenAI, the creator of the popular chatbot ChatGPT, will run its deep learning and AI workloads on Oracle Cloud infrastructure. Additionally, Alphabet's Google has entered a multi-cloud partnership with Oracle, facilitating seamless project deployment across both clouds. As part of this agreement, Oracle will offer "Oracle Database at Google Cloud" starting in September.
These two deals, in particular, are likely to help Oracle distinguish itself and gain market share in the rapidly growing AI sector. The company's progress in securing contracts has been impressive, and these agreements could further strengthen that momentum.
Oracle may not be as large as some of its cloud competitors, but it offers unique advantages that are gaining recognition. The recent deal with Google marks another multi-cloud partnership, following a previous agreement with Microsoft, providing customers with enhanced flexibility - a significant benefit. This flexibility extends beyond partnerships; Oracle also offers solutions like sovereign cloud and Oracle Alloy, which allows customers to operate their own Oracle-based cloud. Additionally, Oracle is known for its competitive pricing, often lower than that of its rivals, which helps it secure contracts.
These strategic advantages, combined with the recent revenue gains in Oracle's cloud business, make the deals with OpenAI and Alphabet particularly positive for the company and its investors. This optimism was reflected in a single trading session, where Oracle’s stock surged by more than 13%, reaching a record high.
While this stock movement is a short-term reaction, it is not isolated. Oracle’s stock has been gaining momentum, with a 20% increase over the past year. If Oracle continues to grow its revenue, expand its capabilities, and collaborate with other major cloud providers, the stock's upward trend could persist.
Is it too late to join Oracle's AI growth story? Definitely not. The stock is currently trading at just 22 times forward earnings estimates, which is a bargain considering its recent achievements and potential for future growth. Now is an opportune moment to invest in this tech company and benefit from the significant news Oracle has recently announced - news that could lead to long-term growth in both earnings and stock price.
While the price is above 125.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 137.93
- Take Profit 1: 143.00
- Take Profit 2: 147.00
Alternative scenario:
If level 125.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 125.00
- Take Profit 1: 115.00
- Take Profit 2: 110.00
