Oracle Stock Jumps on Cloud-Infrastructure Growth and NVIDIA Tie-In

It doesn’t take an oracle to see that Oracle (NYSE:ORCL) stock will close in the green on Tuesday. The stock was up by around 13% in premarket trading, and it wasn’t only due to Oracle’s Street-beating quarterly results.

Sure, the quarterly data contributed to the market’s euphoria and ORCL stock’s push to fresh highs. Yet, it’s the company’s tie-in with kingmaker NVIDIA (NASDAQ:NVDA) that’s putting it on the front page of the financial news.

Oracle thrives in a cloud-niche market

One would be hard-pressed to claim that Oracle is the outright cloud-computing king. After all, the company has to compete with behemoths like Alphabet’s (NASDAQ:GOOG) (NASDAQ:GOOGL) Google Cloud and Amazon’s (NASDAQ:AMZN) Amazon Web Services (AWS).

However, Oracle has a decent shot at taking significant market share in the niche market segment of cloud infrastructure. The company provided evidence of this in its third-quarter fiscal 2024 report, disclosing that its Cloud Infrastructure revenue grew a whopping 49% year over year to $1.8 billion.

Oracle CEO Safra Catz proudly commented on the company’s “performance obligations,” which reflect Oracle’s sizable sales backlog.

“Large new cloud infrastructure contracts signed in Q3 drove Oracle’s total Remaining Performance Obligations up 29% to over $80 billion—an all-time record,” Catz observed.

Catz drove this point home, stating that Oracle expects to “continue receiving large contracts reserving cloud infrastructure capacity.” The CEO even went so far as to predict that Oracle’s “Gen2 Cloud Infrastructure business will remain in a hypergrowth phase… for the foreseeable future.”

Level-headed investors might consider it dangerous for a chief executive to practically promise “hypergrowth.” However, that’s evidently the type of language that today’s investors want to hear, as ORCL stock was firmly in the green on Tuesday.

Certainly, one can’t fault Catz for being optimistic now. Analysts had expected Oracle to report Q3 FY2024 remaining performance obligations of $59 billion, so the actual result of $80 billion represents a confident beat.

In any case, Oracle’s blockbuster quarter was all about the cloud. The company’s overall cloud revenue rose 25% year over year to $5.1 billion; another notable highlight was Oracle’s Cloud Application revenue, which increased 14% year over year to $3.3 billion.

All of this cloud-market performance contributed to Oracle’s year-over-year total revenue growth of 7% to $13.3 billion. This top-line result was in line with analysts’ consensus estimate.

Analysts disagree on ORCL stock

Turning to the bottom-line results, Oracle reported third-quarter fiscal 2024 adjusted earnings of $1.41 per share. That’s up 16% year over year and ahead of Wall Street’s call for $1.38 per share.

Overall, analysts are moderately bullish on ORCL stock, but consensus remains elusive. Guggenheim analyst John DiFucci seems quite optimistic, noting that Oracle’s bookings more than doubled during the past 12 months and declaring, “[T]here’s much more to come.” With that, DiFucci identified ORCL stock as a “best idea,” assigned it a $150 price target, and gave it a Buy rating.

On the other hand, D.A. Davidson analyst Gil Luria provided a more cautious outlook for Oracle.

“We await further evidence Oracle can achieve its ambitious fiscal-year 2026 goals organically,” Luria cautioned investors.

Again, investors may wonder whether it’s sensible for Oracle to guide for “hypergrowth.” Luria assigned a $105 price target to ORCL stock with a Neutral rating, implying significant downside from the current share price, whereas DiFucci is bracing for further upside movement.

Oracle teases NVIDIA tie-in

Even beyond Oracle’s revenue growth in Cloud Infrastructure and “hypergrowth” promise, what really grabbed the market’s attention was its tease of a potential tie-in with artificial intelligence (AI) graphics processing unit (GPU) giant NVIDIA.

Of course, any association with the almighty NVIDIA is viewed as a watershed moment for any company nowadays. Hence, it’s major news that Oracle’s management expects the company to make a joint announcement with NVIDIA, even as soon as next week.

More specifically, Reuters posited that an Oracle-NVIDIA joint announcement “could be made at the chip firm’s GTC developer conference that runs from March 18 to 21.” Thus, we can expect ORCL stockholders to pay extra special attention to this conference.

It’s exciting when a company teases an upcoming announcement and fosters a sense of mystery. However, this could lead to disappointment if the Oracle-NVIDIA joint announcement is anything less than mind-blowing. Thus, if you happen to be lucky enough to own Oracle stock while it’s pushing toward new highs, today is probably a good day to consider taking profits.