Oracle Corp. posted fiscal fourth-quarter earnings and revenue that came in below analyst’s forecasts, but its stock price soared in extended trading after it announced key deals with Google LLC and OpenAI that will see it host more database and artificial intelligence workloads in the cloud.

In a statement today, Oracle said it’s bringing its database offerings to Google Cloud, with availability set to go live in November. When that happens, organizations will be able to deploy workloads in both Google’s and Oracle’s data center regions, without having to pay any fees relating to data transfer, the company said.

According to Sundar Pichai, chief executive of Google’s parent company Alphabet Inc., the deal will enable the numerous customers that use both companies products and services to “use Oracle’s database and applications in concert with Google Cloud’s innovative platform and AI capabilities.”

Separately, Oracle said it’s teaming up with Microsoft Corp. and OpenAI to provide them with additional cloud computing capacity to power AI workloads. “Microsoft remains OpenAI’s exclusive cloud provider, and partnered with them to form this deal with Oracle to extend Azure AI capacity,” a spokesperson for Microsoft said.

In a conference call with analysts, Oracle founder and Chief Technology Officer Larry Ellison (pictured) said the deal means OpenAI will draw on Oracle cloud infrastructure, which provides access to Nvidia Corp.’s graphics processing units, in order to gear up training of its AI models.

Oracle CEO Safra Catz added that the company is working “as quickly as we can to get cloud capacity built out” to catch up with an enormous backlog of AI demand from customers.

The deals overshadowed a somewhat disappointing set of results today. Oracle reported quarterly earnings before certain costs such as stock compensation of $1.63 per share, below the Street’s forecast of $1.65. Revenue rose 3% from a year earlier, to $14.29 billion, shy of the $14.55 billion expected. Net income came to $3.14 billion, down from $3.32 billion in the same period one year earlier.

On the other hand, the company’s guidance for the coming quarter was mixed. Oracle said it’s anticipating fiscal 2025 first-quarter earnings of $1.31 to $1.35 per share, the midpoint coming just ahead of the Street’s target of $1.32 per share. It also guided to revenue growth of between 5% and 7%, short of Wall Street’s forecast of $13.39 billion in sales, which implies growth of 7.6%.

However, Oracle’s full-year guidance was stronger, with the company predicting double-digit revenue growth that accelerates throughout the year. It said it expects sales to pick up as it continues its AI infrastructure build-out and adds more customers.

AI driving cloud growth

Oracle’s quarterly results may have been weak by its usual standards, but investors are clearly very excited about Oracle’s longer-term prospects in the AI industry, said Holger Mueller of Constellation Research Inc. “You’ve got to hand it to Catz and Ellison for the way they razzled and dazzled investors with their new partnerships for Oracle Database and AI workloads,” he added.

The analyst said investors may have also noticed some positives from Oracle’s report. For instance, it still managed to grow its full-year revenue by 10% and increase its bottom line profit, even while throwing more than $28 billion at capital expenditures, he said. “Most of that money went into its AI and data center investments, which is the very reason Oracle is now in a position to run Microsoft’s and OpenAI’s AI workloads,” he pointed out.

There are other reasons for optimism too. During the last year, Oracle signed some of the largest sales contracts in its history, Catz told analysts on the call. She said the company is seeing “enormous demand for training AI large language models in the Oracle cloud.”

That might explain why Oracle’s cloud infrastructure revenue rose 42% in the quarter to just over $2 billion. According to Catz, the company signed more than 30 AI sales contracts in the quarter, worth a combined $12.5 billion.

Those cloud growth opportunities were more than enough for investors to forgive Oracle’s poor quarterly results, with the company’s share price surging more than 9% in extended trading.

Valoir analyst Rebecca Wettemann said part of the attraction for enterprises is that Oracle’s cloud infrastructure is superior to many of its rivals in terms of AI.

“With 50+ generative AI features included in Fusion Apps today, Oracle offers some low-risk ways for CIOs to demonstrate quick wins with generative AI,” Wettemann said. “This is particularly true in human capital management, where Oracle is winning deals over competitors based on the breadth and depth of product, generative AI capabilities and user experience.”

Evercore ISI analyst Kirk Materne said in a note to clients that the deal with OpenAI is a key win that enhances its credibility as a top AI infrastructure platform. “The momentum in the Oracle Cloud infrastructure business is undeniable,” the analyst added.

Oracle provides a measure of this momentum in its remaining performance obligations metric, and new deals announced in the quarter helped raise that number by more than 44% from a year earlier, to $98 billion.

The company said during the quarter that it’s making its database software available to customers in five new Microsoft Azure cloud regions, bringing the total to 15 globally. In addition, the company announced more generative AI features for its NetSuite and Fusion Cloud application suite.

Execution time

Entering a new fiscal year, Oracle now has to follow up its multibillion-dollar investments with strong execution of its carefully laid out plans, Mueller explained. “Investors will want to see it open more data centers, move more database customers to the cloud, build out its AI infrastructure even further, sign up more enterprises on AI deals and grow its Fusion applications business,” the analyst said.

In addition, Mueller said investors will also be looking to see the fruits borne of its partnerships with Google and OpenAI. They may also be hoping for further deals of that nature. “Will AWS and Oracle come together this year?” Mueller asked. “Amazon Web Services’ biggest event of the year looms in December, and we could well find out by then.”

Notwithstanding the after-hours move, Oracle’s stock had gained 18% in the year to date, besting the performance of the S&P 500 Index, which is up 13% in the same period.

Photo: Robert Hof/SiliconANGLE