Oracle Corporation is set to experience double-digit revenue growth in fiscal 2025, driven by soaring demand for its AI-powered cloud services. The announcement, made on Tuesday, exceeded analysts’ expectations and resulted in a 9% surge in the company’s shares after the bell.
In a significant move, Oracle also unveiled partnerships with OpenAI, the creator of ChatGPT, and Google Cloud. This collaboration aims to expand Oracle’s cloud infrastructure, providing customers with enhanced AI capabilities.
“I expect that each successive quarter should grow faster than the previous quarter as Oracle Cloud Infrastructure (OCI) capacity begins to catch up with demand,” CEO Safra Catz stated. Highlighting the company’s momentum, she added, “In Q4 alone, Oracle signed over 30 AI sales contracts totaling more than $12.5 billion, including one with OpenAI to train ChatGPT in Oracle Cloud.”
Oracle’s aggressive investment in AI is seen as a strategic move to compete with cloud giants like Microsoft, which has experienced rapid growth in its Azure cloud service through its alliance with OpenAI. To support these AI endeavors, Oracle has invested billions in hardware from Nvidia, securing its position as a major customer for Nvidia’s new flagship B200 chip.
Despite these advancements, Oracle’s total revenue for the fourth quarter grew by 3% to $14.29 billion, falling short of the $14.55 billion predicted by LSEG analysts. However, the company’s cloud revenue increased by 20% year-over-year, reaching $5.3 billion. The remaining performance obligations, a key indicator of booked revenue, rose by 44% from the previous year to $98 billion in the fourth quarter.
Research analyst Gil Luria from D.A. Davidson noted, “In the cloud market, Oracle is doing well as the fourth-largest provider, but that business has to grow far bigger to help overall growth achieve double digits.” Oracle’s total revenue growth for fiscal 2024 was 6%, with analysts projecting a 9% growth for fiscal 2025.
For the first quarter, Oracle anticipates revenue growth between 5% and 7%, compared to analysts’ estimate of a 7.6% rise. “In Q3 and Q4, Oracle signed the largest sales contracts in our history, driven by enormous demand for training AI large language models in Oracle Cloud,” Catz emphasized.
The company reported adjusted earnings per share of $1.63, slightly below the $1.65 per share expected by analysts. However, the optimistic forecast for fiscal 2025 underscores Oracle’s strategic focus on AI and cloud services as key growth drivers in an increasingly competitive market.
Oracle’s strategic moves and partnerships are set to position it as a formidable contender in the cloud services arena, leveraging AI to fuel its growth and expand its market share in the coming fiscal year.