Oracle stock has been partying like its 1999 – but its big rally will be put to the test soon. Oracle reports its fiscal second-quarter earnings late Monday.
The database software company is on pace for its largest annual gain on the stock market since 1999. Shares are up 76% year-to-date, including a 30% rally since Oracle last reported earnings results in September. (More on Oracle's big year here: How Oracle Got Its Mojo Back. What's Behind The AI Cloud Push Powering Its 80% Stock Gain.)
With such a big recent run, Barclays analyst Raimo Lenschow said in a recent client note that "it is tough to call for short-term outperformance."
But he remains bullish on Oracle's stock's long-term setup.
"What investors need to see this quarter is a continuation of the revenue acceleration story, but also Q3 guidance that supports the double-digit FY25 revenue growth target," he wrote.
Two Cloud Numbers To Watch
The report from Oracle will cover its November-ended quarter. Analysts are expecting adjusted earnings to grow 11% to $1.48 per share, according to FactSet. Sales are projected to grow 9% to $14.1 billion.
But Oracle is a big business with a lot of components. Investors are likely focused on two metrics especially, Guggenheim analyst John DiFucci wrote to clients Thursday.
They are looking for total cloud revenue to grow 24% year-over-year and cloud infrastructure-as-a-service (IaaS) growth of 49%.
Cloud infrastructure in particular has been a focus for investors. The Oracle Cloud Infrastructure business is emerging as a fourth enterprise cloud option, behind the much-larger hyperscalers Amazon, Microsoft and Google.
OCI has benefited as startups and other enterprises seek access to Nvidia chips and other computing infrastructure to power AI projects. DiFucci noted that Oracle expects its IaaS revenues to grow at least 50% for its May-ending fiscal 2025.
Hitting the target IaaS sales growth for the upcoming second quarter will "require significant growth in new annual recurring revenue," DiFucci wrote, "but we trust management's visibility into the timing of deal signings and go-lives."
Guggenheim rates Oracle a buy with a price target of 220.
Oracle Stock: Backlog In Focus
Meanwhile, Jefferies analyst Brent Thill wrote Thursday that investors may be looking for 52% growth for Oracle's cloud infrastructure in the quarter. Expectations for Oracle overall are "elevated after the bullish analyst day in September."
When it reported first quarter earnings in September, Oracle said its remaining performance obligations, or contracted work, grew 53% year over year to $99 billion.
That's a positive sign for overall demand. Thill said Oracle will have to continue that strong backlog growth in its upcoming earnings report, "but Oracle will also need to start converting backlog to revenue for the stock to continue working."
Jefferies rates Oracle stock a buy with a price target of 220.
Can Oracle Keep Software Rally Rolling?
Oracle stock this year has outperformed the broader enterprise software market. For the nine months of the year, 2024 was shaking out as a so-so year for companies that sell software to other enterprises.
But things have quickly shifted. The iShares Expanded Tech-Software ETF, which holds shares of more than 100 enterprise software players, has surged 20% since late October. The rally has more than doubled IGV's year-to-date gain.
Strong earnings results from companies such as such as Salesforce and Snowflake (SNOW) have helped boost confidence that AI can help boost software spending.
Monday's report from Oracle's will offer another test for that rally. MongoDB, a smaller competitor in the database software market, also reports results on Monday.
Oracle Stock: 94 Composite Rating
On the stock market today, Oracle stock fell more than 1% to 185.96 in recent action. Shares rallied to all-time high of 196 late last month before a slight pullback. The stock found support near its 21-day moving average in Thursday trading.
Meanwhile, Oracle stock has an IBD Composite Rating of 94 out of 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
Further, Oracle's IBD Relative Strength Rating is 93 out of 99. The RS Rating means that Oracle has outperformed 84% of all stocks in IBD's database over the past year.
