Oracle Stock Forecast: Is it Expected to Rise in the Long Term?

Oracle Corporation(ORCL), a global leader in database software and cloud computing, has long been a significant player in the tech industry. Investors and analysts alike are keen to understand the future trajectory of Oracle's stock. This article delves into the factors influencing Oracle's stock forecast and evaluates whether it is expected to rise in the long term. Notably, the recent Oracle Q4 earnings report provides crucial insights into the company's current performance and future prospects.

Promising Oracle Q4 Earnings Report

Financial and Performance Report

In Q4, total revenue was $14.3 billion, up 4% including Cerner and 5% excluding Cerner. Total cloud revenue (SaaS + IaaS) excluding Cerner was $4.7 billion, up 23%, and $5.3 billion, up 20% with Cerner. SaaS revenue increased by 10% to $3.3 billion, while IaaS revenue surged 42% to $2 billion. Quarterly total cloud services and license support revenue was $10.2 billion, up 10%. Application subscription revenues grew 6% to $4.6 billion. Strategic back-office SaaS applications annualized revenue reached $7.7 billion, up 16%. Infrastructure subscription revenues rose 13% to $5.6 billion. OCI Gen2 infrastructure cloud services grew 44%, with an annualized revenue of $7.4 billion. Database subscriptions increased by 6%, with cloud database services growing 26% to an annualized revenue of $2 billion. Cloud services and license support gross margin was 77%. Non-GAAP operating income was $6.7 billion, up 9% from last year. Operating margin improved to 47% from last year’s 44%. Non-GAAP EPS for Q4 was $1.63, and GAAP EPS was $1.11.

Operational Highlights

Remaining Performance Obligations (RPO) reached an all-time high of approximately $98 billion in Q4, representing a 44% year-over-year increase from the previous year's $68 billion, with the portion excluding Cerner seeing a 60% increase. OpenAI selected Oracle to run deep learning and AI workloads on Oracle Cloud Infrastructure (OCI). Over the quarter, Oracle signed over thirty AI contracts totaling more than $12 billion, including a contract worth over $600 million for Fusion applications with a large enterprise tech company.

Product and Service Updates

OCI entered into another multi-cloud partnership with Google Cloud Network Interconnect available immediately in ten regions. Oracle Database Services will be running on OCI deployed in Google Cloud data centers starting September.

Future Outlook and Guidance

For fiscal year 2025 (FY2025), double-digit revenue growth is expected, driven by strong demand for cloud services, with each successive quarter anticipated to grow faster as OCI capacity increases. Capital expenditures are projected to double compared to fiscal year 2024 (FY2024). For Q1, total revenues are expected to grow between 6% to 8% in constant currency terms and 5% to 7% in USD terms. Total cloud revenues are projected to grow within the 21% to 23% range in constant currency and 20% to 22% in USD terms. Non-GAAP EPS guidance ranges from $1.33 to $1.37 in constant currency and $1.31 to $1.35 in USD terms.

AI Business Drives Oracle's Growth

Although Oracle didn't provide specific full-year sales growth targets, management's outlook remains very optimistic. CEO Safra Catz expressed confidence in strong AI demand driving overall sales to a double-digit increase this year. She also mentioned that sales growth is expected to accelerate as the year progresses, suggesting that this upward trend could continue into the beginning of the company's next fiscal year.

The company's long-term growth prospects look promising, bolstered by new partnerships with Alphabet and OpenAI. Artificial intelligence is currently one of the hottest trends in the stock market, and Oracle is benefiting from these strategic alliances with some of the biggest players in the AI space.

OpenAI will utilize Oracle's cloud infrastructure for some of its generative AI projects. Investors are particularly excited about OpenAI's ChatGPT being trained on Oracle Cloud. Furthermore, Oracle has entered into a new multi-cloud partnership with Alphabet to enhance its AI services, adding another layer of growth potential for the enterprise software leader.

Should I Buy Oracle Stock Now?

Analysts have a positive outlook on Oracle's future, viewing its involvement in AI and cloud services as key growth drivers. Brent Thill from Jefferies highlights Oracle's strong positioning in a multi-cloud environment. Meanwhile, some analysts at Morningstar consider Oracle's stock overvalued but still acknowledge the impressive growth in its cloud services and AI initiatives. To harness similar AI capabilities in finance, unlock the power of AI with a free trial at Intellectia.AI. Start today!