The database titan’s stock soared last month. Here’s what you need to know about the fuel in Oracle’s tanks and where the company is going next.
Shares of Oracle (ORCL 0.31%) rose 20.5% in June 2024, according to data from S&P Global Market Intelligence. The database software veteran posted mixed fourth-quarter results on June 11, but that announcement also included other market-moving news. The Oracle Cloud Infrastructure (OCI) platform has gained a game-changing customer in the artificial intelligence (AI) space.
Earnings report and OpenAI partnership
In the fourth quarter of fiscal year 2024, Oracle reported non-GAAP earnings per share of $1.63 on sales of $14.3 billion. Your average Wall Street analyst was looking for earnings near $1.53 per share on sales in the neighborhood of $14.6 billion.
Oracle investors largely shrugged off that mixed bag of year-end results to focus on a different tidbit in the same report. CEO Safra Katz noted that the OCI platform will play a role in training OpenAI’s ChatGPT systems from now on.
“Like many others, OpenAI chose OCI because it is the world’s fastest and most cost-effective AI infrastructure,” Katz said on the earnings call. “Everyone’s going to be training their models on imaging. That’s a huge amount of additional data, it’s a huge amount of additional training, and we’re right in the middle of it.”
In a quarter with more than 30 AI-related enterprise contracts, this one turned investor heads and moved stock prices. Oracle’s stock gained 13.3% the next day.
Oracle’s future outlook
Following the earnings report and the announcement of the partnership with OpenAI, several analysts raised their price targets for Oracle stock. Firms cited the OpenAI deal, the cloud platform’s soaring sales, and management’s willingness to make heavy investments in the AI-focused infrastructure.
In total, Oracle shares gained 149% in the first half of 2024. The sleepy enterprise software giant has found new life in the AI market. While the stock isn’t exactly cheap, trading at 39 times earnings and 7.5 times sales, these valuation ratios look quite affordable next to high-priced AI-industry peers such as Nvidia or Microsoft. For price-sensitive investors with a hungry eye on the AI sector, Oracle’s renewed vigor in the booming space offers a compelling mix of growth potential and reasonable value.
Anders Bylund has positions in Nvidia. The Motley Fool has positions in and recommends Microsoft, Nvidia, and Oracle. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
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