AI-driven cloud business revenue soared! Oracle's earnings report exceeded expectations, surging 13% in after-hours trading!
Oracle has indicated that they will soon release an "exciting joint statement" with NVIDIA. It is expected that capital expenditures for the fourth quarter will "significantly increase" due to cloud computing centers, and the previous outlook for the 2026 fiscal year may have been too conservative.
Under the rapid development of AI, the market demand for Oracle cloud computing services has surged. Oracle has announced an exciting joint statement with NVIDIA, anticipating a capital expenditure of $10 billion for data center construction by the 2025 fiscal year, leading to a post-market surge of over 13%.
After the U.S. stock market closed on March 12th, cloud infrastructure giant Oracle released its performance for the third quarter of the 2024 fiscal year. In Q3, revenue reached $13.3 billion, a 7.1% year-on-year increase, in line with expectations. The adjusted EPS was $1.41, surpassing the market's expectation of $1.38. Of particular note, cloud computing revenue soared by 25% to $5.1 billion, exceeding expectations, while revenue from compute and storage rental services was $1.8 billion, and application revenue reached $3.3 billion.
By the end of the third quarter, Oracle's remaining performance obligations (a measure of Oracle's sales backlog) stood at $80 billion, significantly surpassing analysts' expectations of $59 billion. Oracle's CEO Safra Catz pointed out that this figure was driven by "large new cloud infrastructure contracts signed in the third quarter," demonstrating growth momentum:
We expect to continue to secure a significant amount of cloud infrastructure capacity bookings, and Oracle is rapidly opening new data centers to meet demand.
During the earnings call, Oracle's Chairman Larry Ellison highlighted the increase in business from Microsoft:
We are building 20 data centers for Microsoft and Azure. They just ordered three more data centers this week.
Media analysis suggests that Oracle has long been renowned for its database software but has been striving to expand its cloud infrastructure business in recent years to compete with rivals such as Amazon, Microsoft, and Google. However, Oracle's growth in the cloud infrastructure sector has slowed in recent quarters, facing some resistance to its expansion. Nevertheless, in the third quarter, Oracle's cloud business showed a turnaround.
Analyst Brent Thill from Jeffries stated that the surge in Oracle's cloud computing business bookings indicates progress in capturing market share in the cloud computing business, and the financial results were "definitely better than feared."
Catz expects that in the fourth quarter ending in May, Oracle's revenue will grow by approximately 5%, with cloud computing revenue excluding Cerner increasing by 23%. Capital expenditures for this fiscal year will reach $7.5 billion. She added that as the company establishes more data centers to meet the demand for cloud computing, by the 2025 fiscal year, this expenditure will increase to $10 billion. This exceeds the analysts' average expectation of around $8.9 billion. Catz pointed out that the company will continue to pursue the goal of achieving $65 billion in sales by the 2026 fiscal year as previously stated. However, she mentioned that "given our momentum, some of these targets may be too conservative," and the company will soon release an "exciting" joint statement with NVIDIA.