Oracle (NASDAQ:ORCL) stock faces competition from Google Cloud, Adobe Experience Cloud, and Amazon Web Services in the cloud computing sector.It’s among the cloud AI stocks competing for a growing market.
As such, investors shouldn’t be surprised to see ORCL stock up 40% year-to-date, though this return lags most of the top pure-play AI stocks in the market.
Despite challenges, Oracle consistently continues to innovate with strategic partnerships and its international expansion strategy.
This includes the company’s recent $1 billion investment in Spain. This new Cloud Region in Madrid, developed with Telefonica España, aims to drive digital transformation.
Oracle’s focus on industry-specific solutions (such as financial services) and surging revenue (increasing to $14.29 billion in Q4) highlight its adaptive strategy and growth in cloud services.
With strong capabilities in cloud and AI technology, Oracle has emerged as a top contender in the data center sector.
Oracle Adds AMC VM
Oracle recently launched AMD E5 flexible shapes, VM. Standard. E5. Flex, for its Base Database Service, featuring 4th Generation AMD EPYC Processors on Oracle Cloud Infrastructure.
These shapes support single-node or 2-node DB systems with Oracle RAC, offering scalability from 1 to 64 OCPUs and up to 1 TB memory per VM.
Network-attached block storage scales up to 80 TB with options for balanced or high-performance storage, delivering up to 640K IOPS per VM.
Each OCPU includes 1 Gbps network bandwidth, scaling to 40 Gbps for VMs with 40 or more OCPUs, optimizing costs based on workload demands.
Base Database Service ensures high application availability with a 2-node Oracle RAC setup, ideal for maintenance updates and unplanned downtime.
It supports up to 128 OCPUs and 2TB memory, offering Oracle Database Enterprise and Standard Editions 19c, 21c, and 23ai. Oracle Database 23ai enhances applications with AI capabilities like AI Vector Search for advanced data analysis and productivity improvements across user roles.
Oracle Database 23ai introduces JSON Relational Duality and Operational Property Graph, streamlining data access and storage efficiency.
This empowers developers to innovate with simplified APIs, supporting both Oracle Database Enterprise and Standard Editions on flexible AMD, Intel, and Ampere shapes in Oracle Base Database Service for enhanced application development.
Fueled AI Growth and ORCL Stock
Oracle recently exceeded booking expectations and forged key partnerships with tech rivals. This strategic move appears to be tied to Chairman Larry Ellison’s push to reposition the software giant as a major player in the cloud computing segment.
Unsurprisingly, shares have soared to a record high on various announcements along the way.
Known for its database software, Oracle is aggressively expanding its cloud infrastructure unit to rival Big Tech companies.
Although this segment contributes a small share of total revenue, investors see it as pivotal for the future growth strategy of ORCL stock.
The company’s CEO Safra Catz highlighted record sales due to AI large language models in Oracle Cloud, projecting double-digit revenue growth through May 2025.
Oracle has broadened cloud partnerships with Google and Microsoft (NASDAQ:MSFT), enhancing its database growth profile.
OpenAI has picked Oracle for additional cloud capacity, highlighting its AI progress. Ellison emphasized Oracle’s pivotal role in AI technology during Q4 earnings.
First-In Data LLMs Announced
On June 26, Oracle launched HeatWave GenAI, featuring the first in-database large language models (LLMs), automated in-database vector storage, scalable vector processing, and contextual natural language conversations using unstructured content. This innovation allows enterprises to integrate generative AI into their data seamlessly within Oracle Cloud regions, eliminating the need for separate AI databases.
Heat wave GenAI streamlined enterprise data management by allowing developers to create a vector store for unstructured content with a single SQL command and built-in embedding models. It enables direct natural language searches using in-database and external large language models, maintaining data integrity within the database without GPU setup. These simplified operations improve performance, fortify data security, and reduce operational expenses effectively.
ORCL Stock Remains a Strong Buy
Analysts believe ORCL stock could certainly have more upside from here. I’d have to agree.
The company’s fundamentals appear to certainly point in this direction. In Q4, Oracle’s cloud revenue surged by 20% to $5.3 billion, driven by robust performance in its IaaS and SaaS sectors. IaaS sales rose 42% to $2 billion, while SaaS revenue grew 10% to $3.3 billion, meeting market demands effectively. The company’s cloud services and licensing support division achieved a 77% gross margin, indicating a shift toward higher-margin services.
Non-GAAP operating income reached $6.7 billion, up 9% year-over-year. Operating margin improved from 47% to 44%, showcasing Oracle’s effective business development amid rising cloud revenues.
So long as these fundamentals continue to move in this direction, this is a stock with the partnerships and product enhancements that could be poised for a big move higher.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.
Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.
Technology, Artificial Intelligence, Cloud
