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Oracle Shares Surge 9% on Google, OpenAI Cloud Deals

Oracle shares surge 9% on Google and OpenAI deals despite Q4 earnings miss.

6/11, 16:32 EDT
Alphabet Inc.
Microsoft Corporation
Oracle Corporation
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Key Takeaway

  • Oracle shares surged up to 9% in extended trading, driven by new cloud deals with Google and OpenAI despite missing earnings expectations.
  • Oracle reported Q4 revenue of $14.29 billion and adjusted EPS of $1.63, both below Wall Street estimates.
  • Strategic partnerships with Google and OpenAI are expected to boost Oracle's cloud capabilities, contributing to double-digit revenue growth in fiscal year 2025.

Earnings Results

Oracle's shares experienced a notable surge of up to 9% in extended trading on Tuesday, following the announcement of significant cloud deals with Google and OpenAI. This positive market reaction came despite the company's fourth-quarter results falling short of Wall Street expectations. Oracle reported adjusted earnings per share (EPS) of $1.63, slightly below the expected $1.65. Revenue for the quarter was $14.29 billion, missing the anticipated $14.55 billion. Year-over-year, Oracle's revenue increased by 3%, ending the quarter on May 31. Net income for the quarter was $3.14 billion, or $1.11 per share, down from $3.32 billion, or $1.19 per share, in the same period last year.

The cloud services and license support segment generated $10.23 billion in revenue, marking a 9% increase but falling short of the StreetAccount consensus of $10.29 billion. The cloud and on-premises licenses business contributed $1.84 billion in revenue, a 15% decline from the previous year and below the $2.09 billion consensus. Cloud infrastructure revenue reached $2.0 billion, up 42%, though this was a deceleration from the 49% growth rate in the prior quarter. Despite these mixed results, Oracle's cloud business continues to grow faster than its larger rivals, Amazon Web Services and Microsoft Azure.

Strategic Partnerships

Oracle's announcement of new partnerships with Google and OpenAI played a significant role in the positive market response. Oracle revealed that it would bring its database to Google's cloud, with availability expected in November. Additionally, OpenAI has selected Oracle's cloud to provide additional computing capacity, a notable shift given OpenAI's long-standing reliance on Microsoft's Azure. Oracle also announced that its database software would be available in five additional Azure data center regions, bringing the total to 15.

These strategic partnerships are expected to enhance Oracle's cloud capabilities and market reach. The company also introduced generative artificial intelligence (AI) features to its Fusion cloud applications for supply chain and human resources. "Throughout fiscal year 2025, I expect continued strong AI demand to push Oracle sales and RPO even higher—and result in double-digit revenue growth this fiscal year," Oracle stated in its commentary.

Financial Performance

Despite the earnings miss, Oracle's financial performance showed some positive aspects. The company's adjusted operating income for the fourth quarter was $6.67 billion, an 8.3% increase year-over-year, slightly above the estimate of $6.65 billion. The adjusted operating margin was 47%, compared to 44% in the previous year, and higher than the estimated 45.5%. Hardware revenue was $842 million, a slight decline of 0.9% year-over-year but above the estimate of $796.3 million. Service revenue was $1.37 billion, down 6.3% year-over-year, and just below the estimate of $1.4 billion.

Oracle's stock has gained 18% so far this year, outperforming the S&P 500 index, which is up about 13% over the same period. The company signed over 30 AI sales contracts in the fourth quarter, totaling more than $12.5 billion, indicating strong demand for its AI capabilities.