Oracle’s stock surged over 13% to a new record high on Tuesday, buoyed by optimism around its strategic moves in the cloud-computing sector, particularly its collaboration with Nvidia, a leader in AI chip technology. This surge in stock value is a testament to Oracle’s concerted efforts to carve out a significant presence in the cloud market, traditionally dominated by giants like Amazon.com and Microsoft.
The anticipation around Oracle’s upcoming joint announcements with Nvidia, expected to be unveiled at Nvidia’s GTC developer conference from March 18 to 21, has further fueled this momentum. Oracle’s commitment to positioning itself as a cost-effective cloud service provider is evident in its substantial investment in Nvidia chips, aiming to enhance its competitive edge.
This strategy seems to be paying off, as evidenced by Oracle’s impressive third-quarter cloud revenue growth of 25%, alongside a 29% increase in its sales backlog, signaling a robust demand for its cloud offerings. Analysts from Piper Sandler have noted a resurgence in Oracle’s cloud business momentum, marking a significant turnaround from the less-than-stellar cloud performance observed in the previous two quarters.
Oracle’s market value is poised to increase by over $40 billion, reflecting the market’s positive reception to its growth trajectory, with its share price reaching $129.37. The stock has seen a flurry of upward revisions in price targets from at least 14 analysts, setting a new median target at $135.50. Despite trading at a price-to-earnings ratio of 19, below the software and IT services sector average of 31.2, Oracle is making strides in narrowing the gap with its primary competitors in the cloud domain.
Oracle’s performance had lagged behind that of major cloud players like Microsoft in 2023 and early 2024, amid concerns over data center capacity limitations and an uncertain economic landscape. However, Oracle CEO Safra Catz has addressed some of these apprehensions, highlighting the company’s success in securing several large contracts this quarter, with more expected in the pipeline, signaling a promising outlook for Oracle’s cloud business expansion.
