Source: Zhishang Finance and Economics Author: Li Junling

Wednesday morning Beijing time,$Oracle (ORCL.US)$Its financial report for the fourth quarter of fiscal year 2024 was released. The report shows that the company's fourth quarter revenue reached 14.3 billion US dollars, an increase of 3.3% year-on-year, but slightly lower than the market expectation of 14.6 billion US dollars. The net income was 3.14 billion US dollars, or $1.11 per share, a decrease from $3.32 billion and $1.19 per share in the same period last year. However, the profit per share after deducting specific items was $1.63, close to analysts' expectation of $1.65.

It is particularly worth noting that Oracle's cloud computing business performed strongly this quarter, with revenue increasing by 42% year-on-year to $2 billion, exceeding analysts' average expected $1.97 billion. This reflects the strong demand in the market for Oracle's rented computing and storage services. The company also mentioned in the statement that the total remaining contractual obligations in Q4 increased significantly by 44% to $98 billion, far exceeding analysts' expectations of $73.9 billion. This significant increase in this indicator indicates strong potential for future contract sales.

Looking ahead, Oracle expects earnings per share to be between $1.31 and $1.35 in Q1 of FY 2025, with revenue expected to grow by 5% to 7%. This forecast is consistent with analysts' expectations of adjusted earnings per share of $1.32 and revenue of $13.39 billion, indicating a 7.6% increase in revenue.

The company's revenue growth expectation for fiscal year 2025 is in double digits, higher than the forecast of analysts in the market, demonstrating Oracle's confidence in its demand for ai cloud computing services.

Oracle, a company that started with database software, is actively expanding its cloud infrastructure business to compete with cloud computing giants such as Amazon, Microsoft, and Google. Although the sales of the cloud computing department currently only account for a small portion of the total sales, investors generally believe that this is the key to Oracle's future growth.

Kirk Materne, an analyst at Evercore ISI, pointed out that Oracle's cloud infrastructure business is developing strongly, and OpenAI's statement adds bullish signals to the AI field.

Oracle has made significant breakthroughs in the field of cloud computing.

Oracle has achieved significant success in the past two quarters. CEO Safra Catz announced that the company has signed the largest sales contract in history, largely due to the strong demand for AI large language models on the Oracle cloud platform. This statement highlights Oracle's rapid development and high market recognition in the field of cloud computing.

Catz further pointed out that under the strong promotion of AI workloads, the company's revenue growth is expected to reach double digits by the end of the current fiscal year in May 2025. She emphasized that as the production capacity of the cloud computing department gradually meets market demand, the growth rate is expected to accelerate this year.

In order to further expand its influence in the cloud computing market, Oracle announced a new agreement with Google to provide Oracle's database services on Google's cloud infrastructure. This move complements the similar agreement reached with Microsoft at the end of 2023 and will help promote the growth of Oracle's cloud database.

Microsoft also confirmed that although Microsoft is still the exclusive cloud provider for OpenAI, it has partnered with Oracle to expand the capacity of Azure AI. In addition, OpenAI will also use Oracle's cloud infrastructure, including Nvidia's technology, to obtain additional computing power.

Larry Ellison, co-founder and chairman of Oracle, and CTO, stated on the earnings conference call that the company is committed to developing graphics processing units for training AI models, and is building some of the world's largest data centers, which are close to a gigawatt in scale, enough to meet the energy needs of a large city or support a huge AI cloud training data center.

During this quarter, Oracle also announced that its database software will be launched in five additional regions of Azure, bringing the total number of supported regions to 15. At the same time, Oracle's Fusion cloud application, designed for supply chain and human resources management, will also incorporate AI capabilities for further service enhancement.

It is reported that OpenAI has received billions of dollars in investment from Microsoft and plans to expand its computing power using Oracle's cloud infrastructure. Oracle has achieved significant success in the generative AI startup space, with clients including Reka, MosaicML and Elon Musk's xAI, among others.

Katz expects that as Oracle Cloud Infrastructure (OCI) capacity gradually meets market demand, the company's growth rate will accelerate each quarter. In the fourth quarter alone, Oracle signed more than 30 AI sales contracts with a total value of over $12.5 billion, including a contract with OpenAI to train ChatGPT on the Oracle Cloud platform.

In its pursuit of catching up with cloud computing giants such as Microsoft, Oracle's investment in AI has played a key role. In addition, Oracle has invested billions of dollars in hardware from chip giant NVIDIA to support the expansion of its cloud computing business.

Oracle faces industry challenges but prospects remain optimistic.

Recently, the poor performance of software industry giants such as Salesforce and Workday has raised concerns among investors about the possible shift of technology budgets from application software to artificial intelligence tools. This trend has also affected Oracle's cloud application business. Although Oracle's cloud application sales increased by 10% year-on-year, reaching 3.3 billion US dollars, this growth rate is not only lower than the department's growth rate of about 14% in the past few quarters, but also does not meet analysts' expectations.

Anunulag Rana, an industry research analyst for Bloomberg, pointed out that Oracle is expected to accelerate the growth of its cloud infrastructure business by establishing new partnerships, which will help alleviate the impact of slowing application sales.

In addition, Oracle's performance has been challenged by its healthcare division, particularly its $28 billion acquisition of electronic health record business Cerner in June 2022. Oracle is working to transition traditional software businesses to the cloud, despite facing challenges such as customer loss and renegotiating important contracts.

During a recent earnings call, Oracle CEO Safra Catz revealed that Cerner's revenue growth declined by 2% in fiscal year 2024. She also announced that Oracle will no longer report Cerner's financial performance separately in its revenue reports, as Cerner is now in growth mode.

Catz also announced that Oracle will be exiting its advertising business, which contributed only $300 million in revenue in the previous fiscal year.

Despite these challenges, Oracle's stock price has risen 18% year-to-date, outperforming the S&P 500 index's increase of around 13%.

This indicates that although Oracle faces pressure in certain areas, the market still holds an optimistic outlook on its long-term prospects. As the company continues to invest and innovate in cloud computing and AI, Oracle is poised for more robust growth in the future.

Editor/Lambor

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