Oracle's Stock Reaches All-Time High Due to Agreements with Microsoft, OpenAI, and Google

 

Oracle's shares saw a significant increase after the company announced several cloud infrastructure deals with major players in the industry. Despite missing earnings estimates, Oracle's stock reached a record high due to the agreements with Microsoft, OpenAI, and Google.

Analysts praised Oracle's growth in bookings fueled by demand for artificial intelligence solutions. The company's ability to secure contracts with leading companies in AI, such as OpenAI, was seen as a positive indicator for Oracle's future prospects. Additionally, the analysts highlighted the increase in remaining performance obligations as a promising sign for the company.

However, concerns were raised regarding Oracle's weak earnings performance and the rising capital expenditures required to bridge the supply-demand gap. Jefferies analysts pointed out that while the deals with Microsoft and Google may benefit Oracle in the short term, there are uncertainties about the long-term implications of these partnerships.

The announcement of cloud infrastructure agreements with Microsoft and Google had a significant impact on Oracle's stock price, pushing it to a record high. The company's focus on AI-driven growth, particularly in the context of expanding data needs for AI models, was highlighted by analysts as a key factor in Oracle's recent success.

William Blair analysts noted that Oracle's impressive bookings growth was largely driven by demand for AI-related services, with over 30 contracts worth more than $12.5 billion in bookings secured in the fourth quarter alone. The company's growth in AI sales contracts, including agreements with OpenAI, underscored its potential in the AI market.

Looking ahead, Oracle expects its capital expenditures to double in fiscal 2025 compared to the previous year to meet the growing demand for its cloud infrastructure services. Melius Research analysts pointed out that data center capacity constraints could impact Oracle's cloud consumption growth in the future.

Despite the short-term gains from AI contracts, analysts cautioned that Oracle may face challenges in sustaining this growth trajectory. The disappointing fourth-quarter results and increased spending projections for fiscal 2025 raised concerns among analysts about Oracle's long-term profitability.

Jefferies analysts expressed skepticism about the sustainability of Oracle's AI-driven growth, suggesting that partnerships with Microsoft and Google may have limited benefits in the long run. They emphasized that Oracle's hardware-intensive cloud infrastructure business could face economic challenges in the future.

In conclusion, Oracle's recent success in securing cloud infrastructure agreements with major players in the industry has driven its stock price to record highs. While the company's focus on AI-driven growth has shown promising results, analysts remain cautious about its long-term sustainability and profitability in light of weak earnings performance and rising capital expenditures.