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Oracle (ORCL) Rises 31.4% YTD: Can AI Push Drive It Higher?
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Oracle (ORCL - Free Report) has seen its stock price soar 31.4% year to date, outpacing the Zacks Computer and Technology sector and many of its tech sector peers. This impressive rally has caught the attention of investors and analysts alike, prompting questions about the sustainability of this growth and the factors driving it.
At the heart of Oracle's recent success is the company's strategic pivot toward artificial intelligence (AI) technologies. As businesses across industries rush to integrate AI into their operations, Oracle has positioned itself as a key player in this transformative wave. The company's cloud infrastructure and database solutions are increasingly being marketed as AI-ready, appealing to enterprises looking to leverage the power of machine learning and data analytics.
As Oracle prepares to report its next quarterly earnings, investors will be keenly watching for concrete evidence of AI-driven growth. Key metrics to monitor include cloud revenues, particularly from AI-enhanced services, as well as new customer acquisitions and expansion of existing accounts through AI upselling.
Year-to-Date Performance
Image Source: Zacks Investment Research
Oracle's AI Ambitions: Driving Innovation Across the Enterprise
Oracle’s AI strategy is comprehensive, embedding AI functionalities across its cloud infrastructure, databases, enterprise applications, and analytics tools. Oracle has been steadily enhancing its AI offerings, with a particular focus on machine learning (ML), natural language processing and computer vision. These advancements aim to provide customers with more intelligent, efficient and automated solutions.
At the forefront of Oracle's AI initiative is the Autonomous Database, a flagship product that harnesses ML algorithms to automate critical database tasks such as tuning, securing and patching. This self-driving, self-securing and self-repairing database represents a significant step forward in reducing manual management and enhancing overall performance and security.
Oracle continues to push the boundaries of AI integration, as evidenced by its recent announcement of the general availability of Exadata Exascale, a cloud-based intelligent data architecture offering extreme performance for all Oracle Database workloads, including AI vector processing, analytics and transactions at any scale. This cost-effective solution, currently available with Exadata Database Service on Exascale Infrastructure and Oracle Database 23ai on OCI, will soon be expanded to Exadata Cloud@Customer, OCI Dedicated Region and multicloud environments.
Further expanding its AI ecosystem, Oracle has announced new AI innovations in the latest release of the Oracle APEX low-code development platform. The introduction of the APEX AI Assistant simplifies application development, enabling developers to rapidly build feature-rich, mission-critical applications at scale.
Recognizing the need for strategic partnerships to stay competitive in the fast-paced AI market, Oracle has formed alliances with key players in the industry. Oracle has announced a major collaboration with Palantir Technologies (PLTR - Free Report) , certifying Palantir's Foundry Platform and Artificial Intelligence Platform on Oracle Cloud Infrastructure across all distributed cloud deployment options. This partnership combines Oracle's distributed cloud, AI infrastructure, and sovereign AI capabilities with Palantir's AI and decision acceleration platforms, aiming to accelerate AI initiatives for businesses and governments.
Collaborations with SambaNova Systems for AI hardware and NVIDIA for GPU-accelerated AI computing are set to bolster Oracle's AI capabilities in the near term. These partnerships could prove crucial in helping Oracle maintain its competitive edge in the rapidly evolving AI landscape.
What Should Investors Do Now?
The key question now is whether AI can continue to drive Oracle's stock price higher. Bulls argue that the company is still in the early stages of its AI transformation and that the full financial benefits are yet to be realized. They point to potential revenue growth from new AI-driven products and services, as well as improved margins through increased automation.
For the first quarter of fiscal 2025, total revenues are expected to grow in the range of 6% to 8% at constant currency, and given the current currency situation, they are expected to grow in the range of 5% to 7% in dollar terms.
The Zacks Consensus Estimate for ORCL’s fiscal 2025 revenues is pegged at $57.75 billion, indicating year-over-year growth of 9%. The consensus mark for fiscal 2025 earnings is pegged at $6.18 per share, indicating year-over-year growth of 11.5%.
Image Source: Zacks Investment Research
On the other hand, bears contend that much of the AI hype may already be priced into Oracle's stock and highlight the challenges the company faces in differentiating its AI offerings in a highly competitive market dominated by tech giants like Microsoft (MSFT - Free Report) , Amazon (AMZN - Free Report) and Google, as well as newer players like Snowflake and Databricks. AWS, Google Cloud and Microsoft Azure combined accounted for a whopping 67% of the $76 billion global cloud services market in the first quarter of 2024, according to new data from IT market research firm Synergy.
It is also important to consider whether the stock's current valuation accurately reflects the company's long-term growth potential and ability to navigate the competitive landscape.
ORCL is trading at a premium with a price/book of 41.33X compared with the Zacks Computer-Software industry’s 9.8X, reflecting a stretched valuation.
ORCL’s Price/Book Ratio Depicts Stretched Valuation
Image: Bigstock
Oracle (ORCL) Rises 31.4% YTD: Can AI Push Drive It Higher?
Oracle (ORCL - Free Report) has seen its stock price soar 31.4% year to date, outpacing the Zacks Computer and Technology sector and many of its tech sector peers. This impressive rally has caught the attention of investors and analysts alike, prompting questions about the sustainability of this growth and the factors driving it.
At the heart of Oracle's recent success is the company's strategic pivot toward artificial intelligence (AI) technologies. As businesses across industries rush to integrate AI into their operations, Oracle has positioned itself as a key player in this transformative wave. The company's cloud infrastructure and database solutions are increasingly being marketed as AI-ready, appealing to enterprises looking to leverage the power of machine learning and data analytics.
As Oracle prepares to report its next quarterly earnings, investors will be keenly watching for concrete evidence of AI-driven growth. Key metrics to monitor include cloud revenues, particularly from AI-enhanced services, as well as new customer acquisitions and expansion of existing accounts through AI upselling.
Year-to-Date Performance
Image Source: Zacks Investment Research
Oracle's AI Ambitions: Driving Innovation Across the Enterprise
Oracle’s AI strategy is comprehensive, embedding AI functionalities across its cloud infrastructure, databases, enterprise applications, and analytics tools. Oracle has been steadily enhancing its AI offerings, with a particular focus on machine learning (ML), natural language processing and computer vision. These advancements aim to provide customers with more intelligent, efficient and automated solutions.
At the forefront of Oracle's AI initiative is the Autonomous Database, a flagship product that harnesses ML algorithms to automate critical database tasks such as tuning, securing and patching. This self-driving, self-securing and self-repairing database represents a significant step forward in reducing manual management and enhancing overall performance and security.
Oracle continues to push the boundaries of AI integration, as evidenced by its recent announcement of the general availability of Exadata Exascale, a cloud-based intelligent data architecture offering extreme performance for all Oracle Database workloads, including AI vector processing, analytics and transactions at any scale. This cost-effective solution, currently available with Exadata Database Service on Exascale Infrastructure and Oracle Database 23ai on OCI, will soon be expanded to Exadata Cloud@Customer, OCI Dedicated Region and multicloud environments.
Further expanding its AI ecosystem, Oracle has announced new AI innovations in the latest release of the Oracle APEX low-code development platform. The introduction of the APEX AI Assistant simplifies application development, enabling developers to rapidly build feature-rich, mission-critical applications at scale.
Recognizing the need for strategic partnerships to stay competitive in the fast-paced AI market, Oracle has formed alliances with key players in the industry. Oracle has announced a major collaboration with Palantir Technologies (PLTR - Free Report) , certifying Palantir's Foundry Platform and Artificial Intelligence Platform on Oracle Cloud Infrastructure across all distributed cloud deployment options. This partnership combines Oracle's distributed cloud, AI infrastructure, and sovereign AI capabilities with Palantir's AI and decision acceleration platforms, aiming to accelerate AI initiatives for businesses and governments.
Collaborations with SambaNova Systems for AI hardware and NVIDIA for GPU-accelerated AI computing are set to bolster Oracle's AI capabilities in the near term. These partnerships could prove crucial in helping Oracle maintain its competitive edge in the rapidly evolving AI landscape.
What Should Investors Do Now?
The key question now is whether AI can continue to drive Oracle's stock price higher. Bulls argue that the company is still in the early stages of its AI transformation and that the full financial benefits are yet to be realized. They point to potential revenue growth from new AI-driven products and services, as well as improved margins through increased automation.
For the first quarter of fiscal 2025, total revenues are expected to grow in the range of 6% to 8% at constant currency, and given the current currency situation, they are expected to grow in the range of 5% to 7% in dollar terms.
The Zacks Consensus Estimate for ORCL’s fiscal 2025 revenues is pegged at $57.75 billion, indicating year-over-year growth of 9%. The consensus mark for fiscal 2025 earnings is pegged at $6.18 per share, indicating year-over-year growth of 11.5%.
Image Source: Zacks Investment Research
On the other hand, bears contend that much of the AI hype may already be priced into Oracle's stock and highlight the challenges the company faces in differentiating its AI offerings in a highly competitive market dominated by tech giants like Microsoft (MSFT - Free Report) , Amazon (AMZN - Free Report) and Google, as well as newer players like Snowflake and Databricks. AWS, Google Cloud and Microsoft Azure combined accounted for a whopping 67% of the $76 billion global cloud services market in the first quarter of 2024, according to new data from IT market research firm Synergy.
It is also important to consider whether the stock's current valuation accurately reflects the company's long-term growth potential and ability to navigate the competitive landscape.
ORCL is trading at a premium with a price/book of 41.33X compared with the Zacks Computer-Software industry’s 9.8X, reflecting a stretched valuation.
ORCL’s Price/Book Ratio Depicts Stretched Valuation
Image Source: Zacks Investment Research
Hence, investors should wait for a better entry point for Oracle, which currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.