Jea Yu | Published September 25, 2024

Oracle Stock: Cloud and AI Tailwinds Makes This a Must-Own Stock

Oracle Co. (NYSE: ORCL) started as a pioneer in relational databases for businesses in 1977. The company has transformed itself into a major provider of cloud-based software as a service (SaaS) and infrastructure as a service (IaaS) platform to enterprises across 175 countries. Oracle's platform services highlight why leasing is more cost-effective than building your own. Oracle has migrated from on-premises database software sales to becoming a major enterprise cloud provider through its Oracle Cloud Infrastructure (OCI).

Oracle: A One-Stop Shop Platform For Enterprises

The computer and technology sector giant provides supply chain management (SCM), customer relationship management (CRM), human capital management (HCM) and enterprise resource planning (ERP) software coupled with industry-leading database management services, all integrated into its cloud platform. It enables clients to streamline their complete IT operations and access a single source of truth across all critical business functions.

Oracle's Data Intelligence Platform (ODIP) powered by OCI enables companies to use data from different sources for a unified experience that combines data warehouses, analytics, artificial intelligence (AI) and orchestration. Oracle's Data Lake and generative AI-powered analytics were introduced for its ODI platform.

Oracle competes with individual companies that specialize in one or more of Oracle's offerings, including Salesforce Inc. (NYSE: CRM), Workday Inc. (NASDAQ: WDAY) and hyperscalers Amazon.com Inc. (NASDAQ: AMZN), Alphabet Inc. (NASDAQ: GOOGL) Google and Microsoft Co. (NASDAQ: MSFT).

Keep Your Clients Close, Keep Your Competitors as Clients

Oracle vigorously competes with major hyperscalers Google Cloud, Amazon.com AWS and Microsoft Azure in the cloud infrastructure and enterprise application markets. Ironically, they are also major customers of Oracle as well. Oracle’s database technology is the industry standard. Oracle has partnered with the hyperscalers as its become more evident that customers want the flexibility and choice to use multiple clouds.

• Amazon has a strategic partnership with Oracle, launching its Oracle Database@AWS offering that enables customers to access Oracle Autonomous Database on dedicated infrastructure and Oracle Exadata Database Service within AWS. It provides customers with a unified experience between OCI and AWS.
• Google is partnered with Oracle to integrate Oracle Database with Google Cloud. It enables customers access to Oracle Database services, providing a connection between both Oracle Cloud and Google Cloud services. Incidentally, Google won its U.S. Supreme Court case where Oracle sued over Google's use of Java software to code the Android operating system in 2005. Four Oracle Cloud regions are live at Google with 14 more being built.
• Microsoft uses Oracle Database services and OCI to power its Bing conversational searches. Microsoft’s Azure is also partnered with Oracle to allow their customers to operate Oracle Database services on OCI inside its Azure data centers. Microsoft has grown to be one of Oracle’s largest customers. Seven Oracle Cloud regions are live at Microsoft with 24 more being built.

Oracle Had a Smashing Start to Fiscal Q1 2025

Oracle reported fiscal Q1 2025 EPS of $1.39, beating analyst estimates by 6 cents, as revenues rose 7% YoY to $13.31 billion, beating $13.29 billion consensus estimates. Total remaining performance obligations (RPOs) rose 53% YoY to a record $99 billion.

Cloud revenue, including IaaS and SaaS, surged 21% YoY to 5.6 billion. Cloud Infrastructure (IaaS) revenue climbed 45% to 2.2 billion. Cloud Application SaaS revenue rose 10% to $3.5 billion. Fusion Cloud ERP SaaS revenue rose 16% to 900 million.

NetSuite Cloud ERP SaaS revenue rose 20% to $900 million. Oracle signed 42 additional cloud GPU contracts were signed for $3 billion. Its database business is growing due to the multi-cloud agreements with Amazon, Microsoft, and Google. Oracle database technology will soon be accessible to customers within every hyperscaler's cloud.

Oracle also guided fiscal 2026 revenue to be at least $66 billion. It expected fiscal 2029 revenue to surge through $104 billion as it expanded its cloud IaaS business, capitalizing on an ever-increasing number of AI use cases.

Oracle's 162 Cloud Data Centers Worldwide

Oracle has 162 cloud data centers that are live or under construction worldwide. The largest data center is 800 megawatts (8 million watts) and contains acres of NVIDIA Co. (NASDAQ: NVDA) GPUs that will train the world’s largest models. To put this in perspective, 800 megawatts is enough to power 400,000 homes.

Oracle Founder and Chairman Larry Ellison commented, “With today's AWS announcement, our customers will be able to use Oracle's latest Exadata and Exascale RDMA clusters with the latest versions of our database software, from within the Microsoft Azure cloud, from within the Google Cloud and from within the AWS cloud. This will enable customers to use the Oracle database anywhere and everywhere. That has always worked well for our customers and our database business.”

Ellison concluded, “We believe our cloud partnerships with AWS, Microsoft, and Google will turbocharge the growth of our database business for years to come.”

ORCL Stock Attempts a Bull Flag

A bull flag follows a sharp price rise forming the flagpole, followed by parallel descending upper and lower trendlines forming the flag—the bull flag breakout forms when the stock surges through the upper trendline resistance.

ORCL peaked at all-time highs at $173.94 following earnings and raised guidance. The flag formed from the highs as ORCL formed lower highs and lower lows with parallel descending trendlines. The bull flag is attempting to form a breakout at $168.00. The daily relative strength index (RSI) is in overbought territory at the 74-band. Fibonacci (Fib) pullback support levels are at $158.79, $154.11, $145.32, and $138.36.

Oracle’s average consensus price target is $163.88, and its highest analyst price target is $210.00.  

Actionable Options Strategies

ORCL stock has overbought conditions. Therefore, bullish investors can buy on pullbacks using cash-secured puts at the fib pullback support levels to buy the dip and write covered calls at fib extension levels to execute a wheel strategy for income.

Bullish options investors can limit maximum downside and profit from modest upside gains for less capital than owning the stock by implementing a bullish call debit spread.