Oracle Earnings 'Drop the Mic' Moment, Says Dan Ives

Dan Ives, Global Head: Technology at Wedbush Securities, discusses Oracle's share surge after the company's strong outlook for its cloud business.

Oracle Corp. shares gained the most since 1992 after the company gave an aggressive outlook for its cloud business, cementing the software maker’s place in the race to support demand for artificial intelligence computing.

The stock surged as much as 41% Wednesday morning in New York, bringing its market valuation to $947 billion and co-founder Larry Ellison to within striking distance of Elon Musk as the world’s richest person. AI-related stocks such as chip developer Nvidia Corp. and Asian suppliers also climbed.

Known for its database software, Oracle has recently found success in the red-hot cloud computing market and is emerging as a key provider of AI computing capacity, competing against cloud leaders Amazon.com Inc., Microsoft Corp. and Alphabet Inc.’s Google. Earlier this summer, it signed an unprecedented deal with ChatGPT operator OpenAI for 4.5 gigawatts’ worth of data center capacity — enough energy to power millions of American homes. It also counts Nvidia and ByteDance’s TikTok as major cloud customers.

Such deals helped boost remaining performance obligations — a measure of bookings — to $455 billion at the end of the fiscal first quarter, Oracle said Tuesday. That’s more than four times higher than the same period a year earlier. It’s also roughly four times Google’s backlog, according to Bloomberg Intelligence, suggesting Oracle’s cloud-growth rate is poised to surpass Google’s.

“It was an astonishing quarter,” and demand for Oracle cloud infrastructure continues to build, Chief Executive Officer Safra Catz said. The company signed four multibillion-dollar contracts with three different customers in the quarter and expects to sign up several additional customers in the coming months, she added, pushing remaining performance obligations above $500 billion.

Recent and upcoming bookings will translate to a rapidly expanding cloud infrastructure business over the coming years, Catz said. That unit will expand 77% to $18 billion this fiscal year and continue to grow at an aggressive clip, reaching $144 billion in annual revenue by the fiscal year ending in May 2030, she said.

“We’re all kind of in shock in a very, very good way,” Brad Zelnick, an analyst at Deutsche Bank, said during Oracle’s earnings conference call. “There’s no better evidence of a seismic shift happening in computing than these results that you just put up.”

Oracle’s stock was already on a tear before the latest financial results. It was up 45% this year through Tuesday’s close, four times the gain seen in the S&P 500. Its surge on Wednesday lifted other AI stocks including Nvidia, which rose 4.1%. In Asia, Nvidia suppliers rallied in Japan and South Korea, with Advantest Corp. up 3.2% and SK Hynix Inc. advancing 5.6%.

Oracle’s forecast highlights the need for global AI developers to keep accelerating their investments. OpenAI, an Oracle customer, estimates it will require trillions of dollars over time to spend on the infrastructure required to develop and run its services.

Major US companies have in recent days given investors reason for optimism about the pace and sustainability of AI spending. Last week, Broadcom Inc. said it had landed a major new customer in this area — later identified by people familiar with the matter as OpenAI — and surprised investors with a better-than-anticipated outlook.

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