While Elon Musk has been mulling over what to do with his prospective $1 trillion Tesla package, he better get to work hitting the milestones to unlock all that goodness as Oracle (NYSE:ORCL) co-founder, Chairman and CTO Larry Ellison is eyeing his title of world’s richest man. In fact, Ellison – who has a 41% stake in the business software giant – briefly stanched away Musk’s title on Wednesday after Oracle stunned Wall Street with its latest earnings release.
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In what amounted to its biggest share price percentage jump since 1992, ORCL stock climbed 36% on the back of some stunning bookings numbers. Interestingly, the surge took place in spite of disappointing headline numbers, with the company missing expectations on both the top and bottom line.
And somewhat ironically, given Ellison once called cloud computing “complete gibberish,” that is where all the goodness is coming from. That quote, however, is from a long time ago and these days, Oracle, best known for its database software, has been gaining traction in cloud computing, positioning itself as a significant player in AI infrastructure and going up against major cloud providers such as Amazon, Microsoft, and Google.
And to say it is having some success in the field would be a bit of an understatement.
The standout figure from the quarter was a 359% increase in total remaining performance obligations (RPO), which rose to $455 billion. This included an additional $317 billion in commitments signed during FQ1. Oracle has secured major cloud contracts with leading AI players such as OpenAI a (a huge $300 billion deal), xAI, Meta, Nvidia, AMD, and others. Looking ahead, Oracle expects its cloud infrastructure revenue to rise 77% this fiscal year to $18 billion, and then scale to $32 billion, $73 billion, $114 billion, and $144 billion over the following four years. The bulk of this projected revenue is already reflected in its reported performance obligations.
It’s no wonder, then, that Citi analyst Tyler Radke is blown away by the results, with the display offering “further confidence in the durability and profitability of ORCL’s AI business.”
“ORCL delivered a truly historic bookings performance,” Radke said. “This was likely one of the strongest quarterly contract signings we’ve come across in all of software. We had anticipated a strong result with the large OpenAI deal but the inclusion of additional $B contracts and likely more to come in Q2 were significant surprises.”
In fact, given Radke’s our optimistic outlook on AI infrastructure demand, the analyst sees further upside for ORCL shares, with both revenue and earnings growth set to accelerate in the coming years, reinforcing Oracle’s position as a “unique megacap AI winner.”
As such, Radke has not only upgraded his rating from Neutral to Buy, but has also raised his price target from $310 to a new Street-high of $410. This suggests the stock will gain an additional 33% over the coming months. (To watch Radke’s track record, click here)
Overall, ORCL enjoys broad support on Wall Street, with 24 analysts backing the bull case and another 9 recommending investors stay on the sidelines. That mix translates into a Moderate Buy consensus rating, alongside a $322.21 average price target that suggests about 5% upside over the next 12 months. (See ORCL stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.