Shares of Oracle (ORCL) have outperformed the market over the past year, despite the massive turbulence and punishment absorbed by software stocks. The shares have risen more than 11% in the past twelve months, besting the 9% decline in the S&P 500 index.
The company is now seemingly being rewarded for its consistent execution from the past three quarters. Investors want to know if that out-performance can continue. The database and cloud giant will report third quarter fiscal 2023 earnings results after the closing bell Thursday. Meanwhile, over the past six months, the stock has gained almost more than 16% compared to the 1.45% rise in the S&P 500 index.
The reason for the outperformance is due to the growing prospects of the Oracle’s cloud ambitions, namely Oracle Cloud Infrastructure (OCI), which is the company’s primary cloud offerings. Designed to be highly secure, reliable, and scalable, OCI offers corporations various cloud computing services such as storage, networking, compute and databases. The primary target is enterprise customers who wants to move their mission-critical workloads to the cloud.
OCI is in addition to Oracle’s cloud expansion goals and now fits into its applications portfolio, which currently includes Oracle Fusion Cloud Applications and customer experience (CX) applications. Meanwhile, the company’s software-as-a-service segment which continues to grow at exceptionally high rates, while its cloud infrastructure and the autonomous database revenues grew at an even faster pace, will remain key growth drivers.
In the three months that ended February, Wall Street expects Oracle to earn $1.20 per share on revenue of $12.43 billion. This compares to the year-ago quarter when earnings came to $1.13 per share on revenue of $10.51 billion. For the full year, ending May, earnings are projected to rise 1.5% year over year to $4.95 per share, while full-year revenue of $49.88 billion would rise 17.5% year over year.
Ahead of Thursday’s Q3 announcement, investment firm Monness, Crespi, Hardt forecasts Oracle to report not only “healthy growth,” but also establish a "long runway" [for more growth] to come. "In our view, no company is immune to an economic downturn; however, we believe the tailwind of the Oracle Cloud and the stock’s modest valuation provide some downside support," wrote analyst Brian White who has a Buy rating on Oracle stocks.
While referencing Oracle’s 28% rise in deals, the analyst noted it’s likely that Oracle has begun to take market share from competitors. ”The deal momentum in Oracle’s cloud business has shown up in leading indicators such as organic growth,” White added. "This acceleration flies in the face of decelerating RPO growth trends at other software vendors.”
In the second quarter, Oracles top and bottom line beat were driven by sustained cloud strength, with earnings coming in at $1.21 per share on $12.28 billion in revenue. Revenue was boosted by a 14% jump in cloud services and license support revenues which came to $8.6 billion. Just as impressive, Oracle logged a 16% year-over-year increase in cloud license and on-premise license revenues which came to $1.4 billion.
All told, Oracle has asserted itself as a legitimate cloud rival to the likes of Amazon (AMZN) and Microsoft (MSFT). Oracle’s momentum is even more compelling when considering the global cloud computing market is forecasted to grow 16% in the next three years to $947.3 billion by 2026. Currently seen as a transformation play based on its business transition towards a cloud subscription-based model, Oracle on Thursday must demonstrate how it can become a future global cloud leader.
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