Oracle Shares Surge 27% on Strong Cloud Growth Outlook Despite Earnings Miss

Oracle Shares Surge 27% on Strong Cloud Growth Outlook Despite Earnings Miss

Oracle’s stock jumped 27% in extended trading on Tuesday after the software giant outlined ambitious growth prospects driven by new cloud contracts, despite reporting earnings and revenue slightly below analyst expectations.

Quarterly Performance Below Estimates

For the quarter ending August 31, Oracle posted adjusted earnings per share of $1.47, narrowly missing the $1.48 consensus. Revenue came in at $14.93 billion, underperforming against the $15.04 billion forecast. Revenue rose 12% from $13.3 billion a year earlier, while net income remained flat at $2.93 billion, or $1.01 per share, compared to $1.03 per share in the prior year’s quarter.

Robust Backlog and Strategic Cloud Deals

A key highlight was Oracle’s remaining performance obligations—contracted revenue not yet recognized—which surged 359% year-over-year to $455 billion. This backlog underscores strong demand for Oracle’s cloud offerings. Notably, Oracle inked four multibillion-dollar contracts with three distinct customers during the quarter. One of these agreements includes a collaboration with OpenAI to develop 4.5 gigawatts of U.S. data center capacity.

Oracle is capitalizing on the AI boom alongside major cloud providers like Microsoft, leveraging its cloud infrastructure and access to Nvidia GPUs essential for intensive AI workloads. The company also announced that Google’s Gemini AI models will be available on Oracle Cloud Infrastructure, expanding its AI ecosystem partnerships.

AI Integration and Future Outlook

Co-founder and CTO Larry Ellison revealed plans to launch an Oracle AI Database service in October. This service will enable clients to run AI models from OpenAI and other vendors directly on data stored in Oracle databases, deepening integration with OpenAI’s technologies. Oracle has already incorporated OpenAI’s GPT-5 AI model into its cloud applications as of August.

Ellison emphasized AI’s strategic importance, noting his interactions have shifted from CEOs to heads of state due to the technology’s global significance.

Cloud Infrastructure Growth Projections

Oracle generated $3.3 billion in cloud infrastructure revenue this quarter, marking a 55% increase year-over-year. For fiscal 2026, the company projects $18 billion in cloud infrastructure revenue, implying a 77% growth from fiscal 2025’s approximate $10 billion. Oracle anticipates continued expansion, targeting $32 billion, $73 billion, $114 billion, and $144 billion in cloud revenue over the next four years respectively.

Analyst Kirk Materne of Evercore, holding a buy rating on Oracle, had forecasted $108 billion in cloud infrastructure revenue by fiscal 2029, suggesting market optimism around Oracle’s cloud trajectory.

Comparative Context and Guidance

For perspective, Microsoft reported $75 billion in revenue from its Azure cloud over the past 12 months, while Amazon’s cloud revenue neared $112 billion during the same period.

Oracle’s guidance for fiscal Q2 anticipates adjusted earnings per share between $1.61 and $1.65, with revenue growth of 14% to 16%. Analysts had expected $1.62 per share on $16.21 billion revenue, implying 15% growth.

Capital expenditures are projected to increase by 65% to approximately $35 billion, reflecting investments in cloud infrastructure build-out. CEO Safra Catz highlighted Oracle’s asset-light approach compared to some competitors, emphasizing operational efficiency over owning physical facilities.

Market Reaction and Outlook

Oracle shares have gained 45% in 2025 through Tuesday’s close, significantly outperforming the S&P 500’s 11% gain. A continued rise of 22% or more on Wednesday would mark the stock’s best single-day performance since 1999’s dot-com era, potentially pushing Oracle’s market capitalization beyond $800 billion.

— Reporting by CNBC’s Ari Levy contributed to this article.