Oracle shares surged in after-hours trading on Monday following the release of its better-than-expected fiscal third-quarter results. The enterprise software giant reported revenue of $13.3 billion, marking a 7% increase year-over-year and meeting Wall Street estimates. Adjusted earnings per share came in at $1.41, surpassing analysts’ expectations of $1.38.
One of the highlights of the quarter was the robust performance of Oracle’s cloud computing business. Cloud infrastructure revenue soared by 49% to $1.8 billion, with a 52% growth rate excluding certain legacy hosting operations. This growth pushed annualized revenue to $6.7 billion, although the company noted that growth could have been higher if not for supply constraints.
Oracle’s cloud application revenue also saw significant growth, climbing 14% to $3.3 billion. Additionally, the company reported a substantial increase in total remaining performance obligations, a key indicator of future work, which surged by 29% to reach $80 billion.
The combined revenue from cloud services and license support, which includes maintenance contracts on perpetual software licenses, was up 12% year-over-year. Overall, Oracle’s strong performance and upbeat guidance for its cloud computing business contributed to the significant increase in its stock price in after-hours trading.
Oracle’s CEO, Safra Catz, highlighted the company’s continued success in securing large contracts for its cloud infrastructure business, despite high demand outpacing supply, even with the rapid expansion of new cloud data centers. Catz emphasized that Oracle anticipates the cloud infrastructure business to remain in a hypergrowth phase for the foreseeable future.
Moreover, Oracle reported that it has successfully migrated most of its Cerner customers to its cloud infrastructure. The acquisition of Cerner, completed in 2022 for $28 billion, is expected to drive high growth in the electronic health records business for years to come.
The strong performance in the fiscal third quarter marks a turnaround from the previous two quarters, which were impacted by supply constraints in cloud computing and transition issues at Cerner. Looking ahead to the May quarter, Oracle forecasts revenue to increase by 4% to 6%, or 6% to 8% excluding Cerner, with cloud revenue expected to grow between 22% and 24%. Adjusted profits are projected to range from $1.62 to $1.66 per share, in line with analyst expectations.
Larry Ellison, Oracle’s Founder and Chief Technology Officer, noted that the company has 40 contracts valued at over $1 billion each that have yet to be realized. Catz expressed optimism about achieving significantly higher revenue in fiscal year 2025 and expects Cerner to return to growth next year.
Oracle also announced plans to make joint announcements with Nvidia at the graphics chip company’s user conference. Additionally, the company signed a new cloud computing infrastructure agreement with Nvidia during the quarter.
Looking forward, Oracle anticipates capital spending in fiscal year 2025 to be around $10 billion, compared to $7 billion to $7.5 billion in the current fiscal year. Catz addressed the availability of GPUs, stating that Oracle has strong access and capabilities in GPU resources, which are essential for generative artificial intelligence applications.
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