Oracle Corp.’s stock gained more than 3% in extended trading today, after making even bigger gains during the regular trading session. It was all thanks to strong earnings, solid guidance, promises of an upcoming generative artificial intelligence service and an optimistic report from Wall Street analysts.

The database giant reported fiscal fourth-quarter net income of $3.32 billion, up from a $3.19 billion profit a year earlier. Earnings before certain costs such as stock compensation came to $1.67 per share, beating Wall Street’s target of $1.58 per share. Revenue rose 17% from a year earlier, to $13.84 billion, above the consensus estimate of $13.74 billion.

Oracle’s guidance for the first quarter of its fiscal 2024 year was bullish too, with Chief Executive Safra Catz telling analysts on a conference call that she’s looking for earnings of $1.12 to $1.16 per share on revenue growth of between 8% and 10%. Wall Street had been looking for first-quarter earnings of $1.14 per share on revenue of $12.34 billion, which implies growth of just 7.8%.

Oracle said its biggest revenue segment, cloud services and license support, rose 23%, to $9.37 billion in the quarter. On the other hand, revenue from its cloud licenses and on-premises segment fell 15%, to $2.15 billion.

The company’s fastest-growing segment is its cloud infrastructure division, which competes directly with public cloud infrastructure providers such as Amazon Web Services Inc., Microsoft Corp. and Google LLC. The unit’s revenue grew by an impressive 76%, to $1.4 billion, and is therefore expanding much faster than its rivals, though it remains much smaller. Catz said on the call that Oracle’s cloud infrastructure unit’s gross margin is expected to continue expanding in the new fiscal year.

All in all, Oracle’s fiscal 2023 year was impressive, with total revenue rising to $50 billion, up 18% from the previous year.

Shares of Oracle moved higher in extended trading, adding to a gain of almost 5% during the regular session, representing the stock’s best day so far this year. The boost came after Wolfe Research analyst Alex Zukin upgraded Oracle’s stock from a hold to a buy, based on its improving financial performance and its prospects in the growing AI market.

“Aside from cost-driven share gains, OCI also has the one thing that every AI startup is asking for today, spare GPU capacity,” Zukin wrote, referring to graphics processing units that undergird much of the AI boom. “Similar to getting those first cloud workloads during COVID, sometimes timing is everything.”

During the conference call, Oracle founder, Chairman and Chief Technology Officer Larry Ellison (pictured) created more excitement when he said the company will soon introduce a new generative AI cloud service in partnership with the startup Cohere Inc. The new service will be similar to Microsoft’s Azure OpenAI service, which allows customers to deploy large language models that respond to human prompts in a conversational way.

Oracle was one of the primary backers in Cohere’s $270 million Series C funding round, which was announced just last week. The AI startup, which is considered as one of the chief rivals of OpenAI LP, has also agreed to use Oracle’s cloud infrastructure platforms.

“This new service protects the privacy of our enterprise customer’s training data, enabling those customers to safely use their own private data to train their own private, specialized large language models,” Ellison said on the call. He added that Oracle has already begun using the service internally.

Holger Mueller of Constellation Research Inc. told SiliconANGLE he was just as enthusiastic about Oracle’s prospects for AI-driven growth prospects, saying that its cloud DNA for databases is the perfect architecture for generative AI as well. “It offers ultra-fast networking, proximity of compute to data and flexible shapes that help both use cases,” he said. “Of course, it needs GPUs too and Oracle is investing in that, with its capital expenditure reaching over 50% of cash flow for the first time in Q3 and Q4. Ellison and Catz would not do that if there wasn’t a huge opportunity with enterprises looking for alternatives to Microsoft and OpenAI.”

The analyst also highlighted how Oracle’s software-as-a-service portfolio is rapidly catching up with its cloud infrastructure services. “At the current growth rate they will be even by the middle of the next fiscal year,” he said. “The main source of concern for Oracle now is that almost all of its growth is happening in the Americas, with Europe, the Middle East and Africa showing lackluster growth and revenue actually falling in Asia Pacific. If Oracle can get its value proposition right in these geographies, the next full year will look very attractive to investors.”

The buzz and publicity around generative AI also masks the continuing evolution of some very business-specific AI solutions being developed by Oracle and other companies, such as IBM Corp., Google LLC and Salesforce Inc., said Charles King of Pund-IT Inc. “Oracle offers AI solutions that are already benefiting commercial organizations, and they will continue to grow in function and scope,” he said. “Overall, Oracle appears to be well-positioned to gain from those developments in the quarters and years ahead.”

During the quarter, more of Oracle’s cloud services were granted approval for use by U.S. defense and intelligence agencies, paving the way for it to land additional government contracts.

Oracle’s stock has performed well this year, climbing almost 43% prior to today’s gains, compared with just a 13% gain for the wider S&P 500 index.

Photo: Oracle PR/Flickr