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Key takeaways from Oracle’s (ORCL) Q4 2023 earnings report

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Oracle Corporation (NYSE: ORCL) this week issued better-than-expected guidance for the first quarter, in a sign that the tech firm has stayed on the growth path so far in the current fiscal year. Having increased its cloud customers consistently, the company is all set to launch a new generative AI platform for enterprise customers.  

The Austin-based software giant’s stock jumped soon after the earnings announcement, continuing the uptrend seen ahead of the event. Currently trading at an all-time high, ORCL is one of the few tech stocks that has remained unaffected by the recent selloff. Going by the solid growth momentum, the stock is likely to gain further this year.

The Stock

Though the near-term prospects do not look very exciting, experts are bullish on their expectations for the business in the long term. So, ORCL is unlikely to disappoint those who buy and hold it for the future.

Oracle’s infrastructure as a service business grew at an impressive rate in recent years, and the company seems to be on track to become one of the key players in that area. However, in terms of cloud market share, it is far behind market leaders like Microsoft Azure and Amazon Web Services, which calls for effective go-to-market initiatives to accelerate growth.

Results Beat

Driven by aggressive AI initiatives and the rapidly growing cloud business, Oracle’s top line jumped 17% year-over-year in the fourth quarter and reached $13.84 billion. As a result, adjusted profit moved up 8% annually to $1.67 per share. Cloud Services and License Support, which accounts for more than 65% of total revenues, grew an impressive 23%, and the Services segment expanded by 76%. That was partially offset by weakness in the other areas. The latest numbers also topped expectations.

“Since fiscal year 2020, our strategic back-office SaaS business has more than doubled in size. And consumption of our Gen2 cloud infrastructure service is now seven times larger. And while competitors have seen their growth rates drop precipitously over the last year, our cloud infrastructure growth rate has essentially doubled from last year to 77% this quarter, and with Gen2 OCI growth even higher. And we’re far from done. In fact, I just told my team, I think we’re at about the middle of the beginning,” said Oracle’s CEO Safra Catz at the earnings call.

Meanwhile, elevated marking and R&D expenses, as well as a sharp increase in costs related to cloud service and license support, weighed on operating margins which dropped to 30% from 38% last year. The management expects first-quarter revenues to grow 8-10%, and adjusted earnings per share to be between $1.12 and $1.16.

AI Push

In an effort to help its enterprise customers with their generative AI workloads, Oracle has entered into a partnership with Canadian startup Cohere. The new services will protect the privacy of customers’ training data and allow them to safely use their own private data to train their private specialized large language models.

Oracle’s stock opened Tuesday’s session at $116.43 and traded higher in the early hours. The value has nearly doubled since the beginning of the year.

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