Oracle Corporation (NYSE: $ORCL) is a multinational tech corporation that specializes in the development and marketing of technology and software, cloud-computing systems, and enterprise software. Based in Redwood Shores, CA, Oracle is best known for its business data management solutions.
On Monday evening, March 11, 2024, Oracle released its third quarter fiscal 2024 results to a positive market reception.
Oracle Releases Impressive Q3 Fiscal 2024 Results
In the third quarter, Oracle reported an EPS of $1.41 on a net income of $4 billion, beating estimates of $1.38 by $0.03 and rising 14% Y/Y. Its revenue for the quarter was reported at $13.3 billion, beating the analysts’ estimate of $13.29 billion and rising 7% Y/Y.
In Q3, the company reported a 44% non-GAAP operating margin and $8.9 billion in short-term deferred revenues. Oracle reported that it had $18.2 billion in operating cash over the last 12 months and $12.3 billion in free cash flow.
During the quarter, Oracle reported a 4% Y/Y increase in operating expenses to $9.53 billion, or 72% of revenue.
Dividend Payout
Oracle’s board approved a $0.40 quarterly dividend for Q3, to be paid out on April 24, 2024.
Oracle’s Cloud Services Drive Growth
Growth in the third quarter was driven by Oracle’s Cloud services and license support, which saw revenue rise 11% on an FX-neutral basis to $10 billion. However, cloud license and on-location license revenues experienced a 3% dip on an FX-neutral basis to $1.3 billion.
During an earnings call on the second quarter fiscal 2024 results, Larry Ellison, the founder of Oracle, stated that AI was bringing a “gold rush” for tech spending in cloud computing.
In this quarter, Larry Ellison stated that the company was almost done with the move to Oracle’s Gen 2 Cloud Infrastructure. He added that in Q4, they would begin delivery of their new Ambulatory Clinic Cloud Application Suite to their customers.
Ellison noted that the system would be driven by AI and would come with an integrated voice interface, which “automatically generates doctors’ notes and updates Electronic Health Records—saving precious time and improving health data accuracy.”
According to Oracle CEO Safra Catz, new cloud infrastructure contracts signed in the third quarter increased the company’s Remaining Performance Obligations by 29% to over $80 billion, a new record.
Catz added that they expect 43% of that $80 billion to be recognized as revenue over the next four quarters and that their “Gen2 Cloud Infrastructure business will remain in a hypergrowth phase—up 53% in Q3—for the foreseeable future.”
The positive news regarding growth in Oracle’s Cloud Infrastructure is great; analysts believe it will be crucial to the company’s long-term growth.
Oracle (ORCL) Stock Performance
Oracle stock is down 11% from its six-month high close to $130, achieved in September 2023. Before that, ORCL stock had been rising, gaining 55% in the first nine months of 2023. The stock dipped after the release of its Q224 results after missing growth estimates for its cloud infrastructure business.
ORCL stock closed trading on Monday, March 11, 1.52% higher at $114.13 per share. As of Monday, the stock was trading just above its 50-day moving average of $110.86 and 200-day moving average of $112.22. In pre-market trading, the stock is up 12.07%.
At the close of trading on Monday, Oracle stock was up 8.7% Year-To-Date, slightly better than the S&P 500’s performance. Over the past 12 months, the stock was up 34.97%, slightly better than the S&P 500’s 30.58% gain in the same period.
ORCL Stock Forecast
Several analysts have upgraded their forecast for Oracle, based largely on its potential for growth in its cloud infrastructure business. The company has an overall moderate buy rating with a broad price target. At the top, analysts forecast $159, while the most bearish forecast is $105 in the next 12 months. The average price target is $132.95, a 16.49% upside based on its Monday closing price.
Should You Buy ORCL Stock?
Oracle’s cloud infrastructure service has been growing faster than that of rivals Microsoft, Amazon, and Alphabet. However, the company is still behind and only holds a 5% market share, which pales in comparison to Amazon’s 31% market share of the cloud market, 24% for Microsoft, and 11% for Alphabet, according to a Synergy Research Group report in February.
Its successful incorporation of AI into its cloud offerings could give it an edge and allow it to grow its market share. According to the CEO, Oracle expects to “continue receiving large contracts reserving cloud infrastructure capacity because the demand for our Gen2 AI infrastructure substantially exceeds supply—despite the fact we are opening new and expanding existing cloud datacenters very, very rapidly.”
Based on its rapid growth and potential revenue of $80 billion in the coming quarters, ORCL stock could experience a significant increase in price throughout 2024. Consequently, adding it to your portfolio would be a good move.
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