In news that will surprise no one, Oracle Corporation’s (ORCL) fourth-quarter earnings report revealed that the company’s biggest revenue growth was related to artificial intelligence (AI). Oracle also highlighted high-powered deals and AI initiatives.
1. AI-Related Cloud Revenue Growth Beat Everything Else
In Q4, total revenue grew 3% to $14.3 billion. Cloud revenue (IaaS + SaaS) was $5.3 billion, up 20%. Cloud infrastructure (IaaS) revenue grew 42% to $2.0 billion in Q4. Cloud application (SaaS) revenue increased 10% to $3.3 billion in Q4. Key SaaS products like Fusion Cloud ERP and NetSuite Cloud ERP saw double-digit growth in Q4. Much of this was driven by generative AI demands.
2. Major AI Deals in Q4
In just the fourth quarter, Oracle closed on more than 30 AI-related sales contracts for more than $12.5 billion. This includes a partnership with OpenAI to train its ChatGPT on Oracle’s cloud.
3. Multicloud Deal with Microsoft Expanded and Google Too
Oracle expanded its multi-cloud partnerships with Microsoft Azure. The companies will work in tandem to support OpenAI and ChatGPT. They’re in the process of expanding Azure/OCI cloud capacity for Oracle and Microsoft customers. In related news, as hyperscalers interconnect their respective clouds, Oracle also announced a new deal to interconnect with Google Cloud. The Oracle database will be available on Google Cloud starting in September 2024.
4. RPO is Astronomical
Oracle’s total remaining performance obligations (RPO) hit $98 billion. This is up 44% and represents revenue from products and services that the company expects in the future from Q3 and Q4 sales, not yet recognized. It’s largely driven by the huge demand for training AI LLMs (large language models) in the Oracle Cloud.
5. Double-Digit Revenue Growth Expected in FY2025
The company expects revenue to continue to rise, driven by continued AI demand and its strategic partnerships. For now, Oracle’s board announced a cash dividend of $0.40 per share.
The Takeaway
Not that long ago, Oracle was seen as lagging rivals like Google, Microsoft, and Amazon in the AI arms race. However, the company is hooking up strategically and benefiting from the desperate need for AI computing architecture. Oracle’s new numbers and outlook have pleased investors. ORCL is trading, after hours, at $136.42, up 10.25%. Analyst sentiment is that the stock is a Strong Buy.
Neither Julie Stoller nor Stocks.News have positions in this company.
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