Oracle Shares Rise on AI Demand and New Deals with Google and OpenAI

 Oracle shares surged over 13% on Wednesday, following the announcement of its fourth-quarter results and cloud deals with Microsoft-backed OpenAI and Google. This marked the stock’s best performance since December 10, 2021.

The company reported $14.29 billion in quarterly revenue, a 3% year-over-year increase, but below the $14.55 billion analysts had expected, according to LSEG. Adjusted earnings per share were $1.63, just shy of the $1.65 anticipated by analysts.

Oracle revealed $98 billion in remaining performance obligations (RPO) for the fourth quarter, indicating future revenue from existing contracts. CEO Safra Catz noted that significant sales contracts in the third and fourth quarters were primarily driven by demand for Oracle’s cloud services to train AI models.

In addition to its financial results, Oracle announced partnerships with Microsoft and OpenAI to provide additional computing capacity, and that it is bringing its database to Google Cloud.

Citi analysts highlighted that Oracle’s sluggish revenue was balanced by significant RPO bookings growth, although they expressed the need for clearer signs of this translating directly to revenue. They described the results as mixed.

UBS analysts emphasized the “extraordinary sequential backlog growth of $18 billion” as a highlight, noting some missed key metrics but acknowledging the strong AI narrative that is boosting sentiment. UBS reiterated its buy rating on Oracle's stock.

Morgan Stanley analysts considered the quarter mixed but noted that the near-term AI build-out is likely to sustain momentum in Oracle's shares. They raised questions about the nature of Oracle’s contracts and potential impacts on gross margins but acknowledged the significance of the company's impressive bookings and high-profile customer additions like OpenAI.