Source: Wall Street See
Author: Bu Shuqing
$Oracle (ORCL.US)$As a former giant in database software, it has completed a magnificent transformation in the AI wave and has become the fourth largest player in the field of cloud computing.
Intel and$Cisco (CSCO.US)$As it is still struggling to adapt to the industry changes brought about by artificial intelligence, it is also a traditional technology company.$Oracle Corp Japan (4716.JP)$It has completed a gorgeous transformation and become the new darling of Wall Street.
Driven by cloud business, Oracle's performance in the new quarter greatly exceeded market expectations, boosting the company's stock price by 11% on Tuesday and further increasing to a record $157.10 on Monday. Oracle has released three financial reports this year, and after each report, the company's stock price has achieved double-digit growth.
So far this year, Oracle's stock price has risen by 51%, second only to NVIDIA among tech giants.$NVIDIA (NVDA.US)$ (up 143%), outperforming Meta's cumulative increase of 48%. Former tech leader Intel's market cap has shrunk by 60%, and Cisco's market cap has fallen by nearly 3%. Both companies announced large-scale layoffs in their financial reports last month.
With a 47-year history, Oracle started with relational database software and missed out on the cloud computing transformation wave in the past decade, leading to stagnation in company development. However, the rise of artificial intelligence has brought new opportunities, and Oracle has now become the fourth largest player in the cloud computing field.
Cloud business - the new growth engine.
Financial reports released on Monday showed that Oracle's first quarter revenue grew 7% year-on-year to $13.3 billion, and the highly anticipated cloud infrastructure revenue grew 45% year-on-year to $2.2 billion, both exceeding market expectations. Although Oracle's cloud infrastructure still lags behind$Amazon (AMZN.US)$Cloud computing service (AWS), $Microsoft (MSFT.US)$and Google, but has become the company's new growth engine.
"All businesses are showing growth momentum," Guggenheim wrote in a report, and Oracle is back!
In a report on Tuesday, JPMorgan wrote that after experiencing single-digit growth for thirteen years, Oracle will accelerate back to double digits. The institution upgraded Oracle's rating from neutral to buy, and stated:
We remain confident in Oracle's earnings per share and are committed to achieving double-digit growth in total revenue for the year.
Since 2011, Oracle has only achieved double-digit revenue growth in one year, with an 18% increase in the 2023 fiscal year, and the company has seen revenue decline four times.
Oracle is currently holding its annual CloudWorld conference, which will end in Las Vegas on Thursday. With the release of its financial report and the progress of the conference, investors are satisfied with Oracle's performance in cloud business, including its infrastructure and database businesses.
Ellison said in Monday's earnings conference call that building large data centers is something Oracle is very good at.
That's why we are doing so well in our artificial intelligence training business.
A recent report by Morgan Stanley estimates that by 2027, artificial intelligence revenue will account for more than 50% of Oracle's total cloud computing revenue, up from 15% in the most recent fiscal year.
Dan Morgan, portfolio manager of Synovus Trust, which holds Oracle shares, said,
Compared to relational databases, Oracle is now seen more as an artificial intelligence company.
Turning competitors into partners
In addition to competing with cloud computing giants, Oracle is also accelerating the establishment of partnerships with them.
A year ago, Larry Ellison, the founder of Oracle, visited Microsoft's headquarters in the suburbs of Seattle for the first time, announcing a partnership with the company he had been competing with for over 30 years.
Currently, it has established partnerships with Microsoft, Google, and Amazon, all of which allow Oracle's databases to run in their cloud infrastructure. Microsoft runs its Bing AI chatbot on Oracle's servers. Other major clients include xAI, Elon Musk's AI company, and Nvidia.
Ellison said,
We believe that collaboration with AWS, Microsoft, and Google Cloud will drive the growth of our database business in the coming years.
Over the years, Ellison has described Oracle's database as "automated" to meet the needs of autonomous vehicles (he was a board member and had a close relationship with Musk) and artificial intelligence.$Tesla (TSLA.US)$According to Ellison, the Oracle database does not require manual patching, no downtime requiring human intervention, and no other cloud provider can do this.
According to Ellison, Oracle's database does not require manual patching, eliminating the need for human intervention and downtime, a feat that no other cloud provider can achieve.
Datacenters designed for large-scale models.
Some analysts believe that another advantage of Oracle may be its late entry into the field of cloud computing, with many of its 162 datacenters being built in recent years specifically for the development of large-scale models.
Oracle launched its cloud business in 2016, but its performance was disappointing, so it underwent reconstruction two years later.
Now, Oracle is investing billions of dollars in cloud business to build 100 datacenters. Oracle promises customers that it will not promote other cloud services or proprietary chips like other major cloud service providers.
In response to this, Nick Frosst, co-founder of AI startup Cohere, said that Oracle is only building truly effective products. Oracle is also one of Cohere's investors and cloud service providers.
In addition, Oracle has not developed its own large-scale models to compete with potential downstream customers, making it seen as a neutral and non-threatening player.