Oracle stock surged Tuesday after the tech giant credited strong AI demand for fiscal first quarter results that beat expectations. The 47-year-old Oracle is also forming a strategic partnership with cloud-services rival Amazon.com's Amazon Web Services.
Oracle said in results published late Monday that it earned an adjusted $1.39 per share on sales of $13.3 billion in the August-ended quarter. On average, analysts projected the Austin, Texas-based company would post adjusted earnings of $1.33 per share from sales of $13.2 billion, according to FactSet.
Oracle's sales increased 7% year over year while earnings increased 17%.
"As cloud services became Oracle's largest business, both our operating income and earnings per share growth accelerated," Oracle Chief Executive Safra Catz said in a news release.
On the stock market today, Oracle stock rallied more than 11% to 156.34. The stock has broken out past a 146.59 flat base buy point identified by MarketSurge pattern recognition.
Oracle Touts AI Traction
Oracle stock had gained more than 30% year to date heading into the report. Its strong run was helped by momentum for its Oracle Cloud Infrastructure business, including from winning cloud-computing contracts from AI-focused startups. That has helped Oracle outrun struggles that have hit other software stocks this year.
In its earnings release Monday, Oracle said it had won 42 new cloud contracts for graphics processing units, worth $3 billion total. Graphics processing units, or GPUs, are the chips that power the training and production of AI models. Chairman and Chief Technology Officer Larry Ellison said in a news release that Oracle is constructing a data center with "acres of Nvidia GPU Clusters for training large scale AI models."
Oracle's cloud infrastructure revenue increased 45% to $2.2 billion. That marked a slight acceleration from a 42% year-over-year increase for Oracle's May quarter. Cloud infrastructure sales jumped 49%, 52% and 66% in the quarters prior to that.
Meanwhile, Catz said Oracle's remaining performance obligations, or contracted work, grew 53% year over year to $99 billion.
"The RPO growth shows the strong momentum for Oracle Cloud and the Oracle AI story," Barclays analyst Raimo Lenschow said in a client note. "This large bookings number should give investors confidence that Oracle can accelerate revenue this year and next and makes the (fiscal year) 2026 targets even more realistic, in our view."
Lenschow rates Oracle stock a positive overweight.
Oracle's long-term fiscal year 2026 guidance includes a revenue target of $65 billion. On a call with analysts Monday, Catz reiterated Oracle's expectations to reach double-digit revenue growth for Oracle's May-ending fiscal 2025. Sales grew 6% for Oracle's fiscal 2024.
Oracle Partners Up With Amazon
The "biggest news of all" from Oracle's earnings release, as Catz described it in her statement, is a multi-cloud agreement with AWS, which is the largest provider of cloud servers by market share.
Ellison said in a separate news release focused on the deal that Oracle is seeing "huge demand" from customers who want to use multiple cloud providers.
"To meet this demand and give customers the choice and flexibility they want, Amazon and Oracle are seamlessly connecting AWS services with the very latest Oracle Database technology, including the Oracle Autonomous Database," Ellison said in the news release.
Oracle struck similar deals with Microsoft and Google Cloud parent Alphabet in the past 12 months, leading to market speculation that Amazon would be next.
However, there is some complicated history between the two. The battle for Oracle to catch up to Amazon's big lead in cloud services often included public trash-talking between Ellison and Amazon Chief Executive Andy Jassy, who led AWS before taking the top job at Amazon.
The two rivals appear to be putting those differences aside to offer Oracle Database@AWS. Ellison and AWS Chief Executive Matt Garman will discuss the partnership Tuesday at Oracle's annual CloudWorld event in Las Vegas.
Evercore ISI analyst Kirk Materne said the partnership "helps illustrate that Oracle's stickiness with customers remains strong and could potentially help more on-premise workloads transition to the cloud at a faster pace." Materne rates Oracle stock as outperform.
Oracle Stock Break Out
The CloudWorld conference will include an analyst day Thursday, offering another potential catalyst for the stock. Before its report, Oracle stock fell 1.4% to 139.89 in regular trading.
MarketSurge shows that Oracle stock has broken out past a flat base pattern with a buy point of 146.59. That marks Oracle's second breakout in four months. In June, Oracle stock broke out above a 132.77 buy point from a cup base following its fiscal Q4 earnings report, according to MarketSurge pattern recognition.
Shares have gained 51% year to date, ahead of a 15% gain for the S&P 500. Further, Oracle's 27% gain in the past 12 months is outperforming the S&P 500's 22.5% rise.
Meanwhile, Oracle stock has an IBD Composite Rating of 81 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 was 86 out of 99. The RS Rating means that Oracle outperformed 86% of all stocks in IBD's database over the past year.
