Oracle (ORCL, Financial) +11%: Oracle's stock is trading significantly higher today, even though it reported a rare EPS miss for Q4 (May). This miss follows six consecutive EPS beats. Revenue increased by 3.3% year-over-year to $14.29 billion, falling short of expectations. However, Oracle's top-line performance tends to be inconsistent, making the EPS miss more surprising. The company provided in-line EPS guidance for Q1 (Aug).
Why is Oracle's Stock Higher Despite the EPS Miss? Several factors contribute to this rise:
- RPO: Oracle's remaining performance obligations (RPO) soared by 44% year-over-year to $98 billion, up from $80 billion in Q3. Excluding Cerner, RPO increased by 60% year-over-year. About 39% of total RPO is expected to convert to revenue within the next 12 months.
- Oracle signed its largest sales contracts ever in Q4, driven by demand for training large language models and record sales for OCI, Autonomous, Fusion, and NetSuite. The company is trading one-time license revenue for larger commitments from multiyear cloud deals, marking the full emergence of its high-growth cloud businesses.
- Partnerships: Oracle announced that OpenAI selected Oracle Cloud Infrastructure for deep learning and AI workloads. Oracle signed over 30 AI contracts worth more than $12 billion this quarter and nearly $17 billion this year. Additionally, Oracle entered a multi-cloud partnership with Google Cloud, planning to offer Oracle Database@Google Cloud by September.
- Non-GAAP operating margin increased to 47% in Q4 from 44% a year ago, reflecting Oracle's growing efficiencies. The company expects to further expand its operating margin as it benefits from economies of scale in the cloud.
Overall, investors are focusing on Oracle's robust RPO performance, large multi-year deals, and significant cloud business growth rather than the Q4 EPS and revenue miss. The OpenAI and Google Cloud partnerships are also generating excitement.
Q4 marked the fourth consecutive earnings report leading to a price gap. While Q1 and Q2 saw declines, Q3 and Q4 experienced gains. Oracle's stock has generally traded between $100-130 over the past year, even as other tech stocks surged. This report has pushed shares above that range, signaling a bullish trend.
