Oracle gains after profit tops estimates on cloud expansion

ORACLE jumped in extended trading after reporting better-than-expected quarterly profit, signalling that artificial intelligence (AI) demand continues to help its cloud computing business boost earnings.

Earnings, excluding some items, were US$1.39 a share, Oracle said on Monday (Sep 9). Revenue increased 7 per cent to US$13.3 billion in the period ended Aug 31. Analysts, on average, estimated a profit of US$1.33 a share on sales of US$13.3 billion.

“As cloud services became Oracle’s largest business, both our operating income and earnings per share growth accelerated,” chief executive officer Safra Catz said.

The Austin-based company, known for its database software, is focused on expanding the cloud infrastructure business to compete with Amazon.com, Microsoft and Alphabet’s Google. Oracle’s cloud has developed a reputation for success with generative artificial intelligence workloads – the company touted customers including including Reka and Elon Musk’s xAI.

The company also announced a new agreement on Monday to make its namesake database available on the Amazon Web Services (AWS) cloud. Similar deals had been inked with Microsoft and Google previously, and are seen by analysts as a way to modernise Oracle’s database business.

The deal with AWS is “a good thing for Oracle’s database business, which is still largely on-premise at this point”, Anurag Rana, an analyst at Bloomberg Intelligence, said.

Fiscal first-quarter cloud revenue increased 21 per cent to US$5.6 billion, meeting estimates. Of that, US$2.2 billion came from renting computing and storage. The remaining performance obligation – a measure of booked sales – was US$99 billion, which Catz said will spur increased revenue growth throughout the fiscal year.

Investors are likely taking the high remaining performance obligation as a sign of more sustained growth for Oracle, said Alex Zukin, an analyst at Wolfe Research.

The shares gained about 9 per cent in late trading after closing at US$139.89 in New York. Oracle has been one of the best-performing large software stocks this year, rising 33 per cent through the close.

Management has said it’s rapidly constructing new data centres to keep up with the demand for servers to power AI. Capital expenditures, which are watched as a metric of that investment, were US$2.3 billion in the quarter. Analysts estimated US$3 billion.

“Oracle has 162 cloud data centres in operation and under construction around the world,” chairman Larry Ellison said. BLOOMBERG