Shares of the database giant Oracle Corp. rose more than 13% in extended trading today after it posted a solid earnings beat, with particularly strong results in its growing cloud business.

The company reported third-quarter earnings before certain costs such as stock compensation of $1.41 per share, beating the analysts’ consensus estimate of $1.38 per share. Revenue for the period rose 7%, to $13.3 billion, in line with Wall Street’s estimates. All told, the company reported net income for the quarter of $2.4 billion, up 18% from a year earlier.

The growth was driven primarily by Oracle’s accelerating cloud infrastructure business, where revenue increased by an impressive 49% from a year earlier to $1.8 billion. The company said that this growth was even higher, at 52% when excluding some legacy hosting operations, boosting its annualized revenue to $6.7 billion. Growth would have been even higher still if not for supply constraints.

Elsewhere, the company’s cloud application revenue jumped 14%, to $3.3 billion, while total remaining performance obligations, which is a metric that predicts future work, rose 29%, to $80 billion. Meanwhile, cloud services and “license support” contrasts for perpetual software licenses rose by 12%.

Oracle Chief Executive Safra Catz said the company’s cloud infrastructure business landed a number of large contracts during the quarter. She added that “demand for our Gen2 AI infrastructure substantially exceeds supply,” even as the company races to open up more data centers and expand its existing ones. Given this demand, Catz said, the company expects that its nascent generative artificial intelligence infrastructure business will “remain in a hypergrowth phase for the foreseeable future.”

In a conference call, Catz said the company has now moved most of its Cerner customers onto its cloud infrastructure. She added that the electronic health records business, which Oracle bought in 2022 for $28 billion, will remain a “high-growth business” for many years to come.

Notably, the strong results brought to a halt a two-consecutive-quarter run in which Oracle disappointed investors with lower-than-expected earnings results, which was blamed on supply constraints hampering the cloud computing business and the ongoing transition of Cerner.

Those issues have apparently now been resolved and Oracle issued some reasonably optimistic forecasts, saying it sees revenue growth of between 4% and 6%, or 6% to 8% when excluding Cerner, during the current quarter. Wall Street is looking for revenue of $14.74 billion, which would represent growth of 6%. Cloud revenue is expected to grow even more, at between 22% and 24%, while earnings are forecast in a range of $1.62 to $1.66 per share, in line with the Street’s consensus of $1.64.

On the conference call, Oracle founder and Chief Technology Officer Larry Ellison (pictured) told analysts that the company now has 40 contracts booked with a value of more than $1 billion that are yet to come online.

In addition, Ellison spoke of Oracle’s new generative AI business that launched in January, saying that the company is bringing the technology to multiple industries. He highlighted a digital assistant the company has created for ambulatory clinic systems and another system that’s helping Albania bring its laws in line with those of the European Union, so it can become an EU member.

“Oracle’s Gen 2 AI infrastructure business is booming,” Ellison said. “That’s become pretty clear to everybody.”

Holger Mueller of Constellation Research Inc. said Ellison deserves a lot of credit for seeing the transformative potential of generative AI much earlier than many other technology giants and investing in its Nvidia-based GPU infrastructure fleet. “It definitely wasn’t cheap but that gamble is paying off,” Mueller said. “As the third- or fourth-ranked cloud vendor, it needs to spend aggressively and be more creative to catch up, and Ellison has done a good job of that.”

According to Catz, Oracle will deliver total revenue in the August 2025 fiscal year that is “significantly higher” than what’s anticipated in fiscal 2024. She said part of this is thanks to Cerner, which has been a drag on growth in recent quarters but is expected to return to growth over the next year now that its transformation is complete.

Valoir analyst Rebecca Wettemann said the Oracle Cloud Infrastructure business was the single largest driver of revenue growth for the company, because it leverages Oracle’s historical strengths as a database infrastructure provider. “When large organizations are looking for infrastructure to support AI workflows, trust is a huge factor, and Oracle’s ability to optimize infrastructure and ensure security and reliability are really important,” she said.

However, Wettemann said Oracle still needs to do a better job in terms of making the case for its AI approach versus those of competitors such as ServiceNow Inc. and Salesforce Inc. Oracle’s problem, she explained, is that its primary value proposition from an enterprise applications perspective is that customers can run finance, supply chains, human resources management and customer relationship management all on Oracle, but this isn’t necessarily what everyone wants. “Not all companies want to put all their eggs in one basket,” she said.

She also said the jury is still out on Oracle’s acquisition of Cerner, despite Catz’s claims that it will return to growth. “Although Ellison has been talking about some big changes, migrating existing customers to Oracle infrastructure is one thing, but getting physicians to change applications is entirely another thing,” she said.

Charles King of Pund-IT Inc. said some investors will have noticed that Oracle barely met expectations in terms of revenue. However, that means the company deserves all the more credit for managing its resources to deliver better-than-expected earnings. “While that led to the significant after-hours bump in Oracle’s share price, the company’s sunny outlook could also portend good news for the broader enterprise infrastructure sector,” he added.

Other news that pleased investors includes talk of a joint announcement between Oracle and Nvidia Corp. that will be revealed next week at the chipmaker’s annual user conference. In addition, Ellison said Oracle signed a new cloud computing infrastructure deal with Nvidia in the quarter just gone. Nvidia is a key partner for Oracle as its graphics processing units are widely used to power generative AI workloads in cloud data centers, so news of any partnership is an encouraging sign of progress in that area.

One particular concern for investors is whether Oracle will be able to secure enough GPUs to facilitate the expected growth in its AI business, but Catz reassured them that this won’t be a problem. “We are very good in our GPU access and capabilities,” she insisted.

Photo: Robert Hof/SiliconANGLE