Oracle (ORCL, Financial) experienced a significant uptick, soaring 11% after its Q3 (February) earnings report, a refreshing change following two previous quarters of declines post-earnings. The company's earnings per share (EPS) slightly exceeded expectations, with revenue and Q4 (May) EPS guidance aligning with forecasts. The positive market reaction can be attributed to several factors:
- The earnings and guidance were better than anticipated, alleviating investor concerns.
- A remarkable 29% year-over-year increase in Remaining Performance Obligations (RPO) to a record $80 billion, up from over $65 billion in Q2, driven by significant new cloud infrastructure contracts.
- Oracle's anticipation of continued high demand for its Gen2 AI infrastructure, which is currently outpacing supply despite rapid datacenter expansions.
- Positive long-term outlook, with Oracle expecting accelerated revenue growth into FY25 as supply constraints ease and its cloud services demand surges.
- Improvement in non-GAAP operating margin to 44% in Q3 from 42% a year ago, with expectations of further expansion.
Despite the modest Q4 guidance, Oracle's optimistic projections for FY25 and beyond, particularly regarding its Gen2 Cloud Infrastructure business and the potential underestimation of its FY26 goals, have captivated investors. After a period of stagnation, Oracle's stock has hit a new 52-week high, indicating a potential long-term upward trajectory fueled by its booming Gen2 AI infrastructure business and strategic expansions.
