Oracle’s recent performance in the cloud market has sent shockwaves through Wall Street, solidifying its position as a pivotal player in the artificial intelligence landscape. The company’s reported remaining performance obligations (RPO) surged by approximately 360%, reaching an astounding $455 billion. This substantial backlog has prompted Oracle to forecast a 77% growth in its Oracle Cloud Infrastructure (OCI) business, anticipating revenues of $18 billion for the current fiscal year and projecting a staggering $144 billion by 2030.
Deutsche Bank analyst Brad Zelnick described the results as “truly awesome,” affirming Oracle’s status as a leader in AI infrastructure. CEO Safra Catz revealed that Oracle secured four multibillion-dollar contracts with three different clients in the first quarter, citing significant partnerships with industry heavyweights like OpenAI, xAI, Meta, Nvidia, and AMD. The Wall Street Journal has also reported a potential $300 billion, five-year deal with OpenAI.
Following the announcement, Oracle’s stock experienced a meteoric rise of over 36%, marking the largest single-day increase since December 1992 and boosting the company’s market value by over $250 billion. This jump elevated Oracle chairman Larry Ellison to the title of the world’s richest person, surpassing Tesla CEO Elon Musk.
Despite this remarkable market reaction, Oracle’s earnings and revenue for the first quarter did fall short of Wall Street’s expectations. The company has taken steps to address expected AI demand, raising its forecast for capital expenditures to $35 billion, up from a previous estimate of $25 billion. This announcement positively influenced the stocks of leading AI chip makers Nvidia and AMD, which rose by 4% and 3.5%, respectively.
Analysts noted the implications of Oracle’s impressive backlog, with William Blair’s Sebastien Naji labeling it “astonishing,” while Jefferies analyst Brent Thill referenced “growing AI optimism.” Recent weeks had seen tech stocks facing headwinds, with concerns regarding the sustainability of the AI-fueled rally. Commentary from OpenAI CEO Sam Altman about a potential “AI bubble” and an MIT report indicating limited returns on AI investments had spooked investors, leading to a slowdown in the market.
However, Oracle’s report has reinvigorated investor confidence, with the S&P 500 and Nasdaq both reaching record highs in the aftermath. Truist Wealth’s co-chief investment officer, Keith Lerner, emphasized that the current bull market is heavily tied to AI and technology, underscoring the validation provided by Oracle’s latest results.
Nevertheless, some analysts remain cautious about Oracle’s future. JPMorgan’s Mark Murphy, while raising the price target for Oracle shares to $270 due to its strong bookings, expressed concerns regarding customer concentration risk and the feasibility of future payments amounting to $455 billion. Similarly, William Blair’s Naji pointed out the risks associated with heavy reliance on major customers who might limit investments over time. OpenAI, a key client, is expected to deplete $115 billion in cash through 2029, against projected annual revenues of $13 billion this year.
Bank of America analyst Brad Sills also highlighted the ongoing debate surrounding Oracle’s ability to profitably grow its AI cloud business, though he upgraded the stock rating to Buy from Neutral in light of the earnings results. Oracle’s stock surge has seen its shares increase by 97% year-to-date, lifting its market capitalization above $920 billion.
