Oracle Analysts Focus On AI-Driven Bookings Strength, Expect Revenue Acceleration To Continue

Shares of Oracle Corp ORCL climbed in early trading on Tuesday, after the company reported upbeat fiscal first-quarter results.

The company reported its results amid an exciting earnings season. Here are some key analyst takeaways.

• JMP Securities analyst Patrick Walravens upgraded the rating to Market Outperform with a price target of $175.
• KeyBanc Capital Markets analyst Jackson Ader reaffirmed an Overweight rating, while raising the price target from $165 to $175.
• Stifel analyst Brad Reback maintained a Hold rating, while lifting the price target from $135 to $155.
• JPMorgan analyst Mark Murphy reiterated a Neutral rating and price target of $120.JPMorgan
• Bank of America Securities analyst Brad Sills reiterated a Neutral rating, while raising the price target from $155 to $175.

Check out other analyst stock ratings.

JMP Securities: Oracle reported better-than-expected results for the fiscal first quarter, with non-GAAP earnings of $1.39 per share, above consensus of $1.32 per share and operating margins of 42.9%, beating consensus of 42.2%, Walravens said in the upgrade note. Revenues came in at $13.31 billion, higher than consensus of $13.20 billion, and revenue growth accelerated to 7% year-on-year, from the previous quarter's 3%, he added.

RPO (remaining performance obligation) came in at $98 billion, accelerating to 53% year-n-year growth, from the last quarter's 44% growth, the analyst stated. Management guided to non-GAAP earnings of $1.45-$1.49 per share for the fiscal second quarter, better than consensus of $1.47, while the revenue guidance came in-line with expectations, he further said.

KeyBanc Capital Markets: Although Oracle's total RPO accelerated, the growth rate "was up against the easiest comparable from FY24 and slowed pretty significantly on a two-year stack basis," Ader said. He added, however, that this growth is sufficient to offset concerns around OCI recognized revenue.

Oracle’s capex entering the quarter was $2.3 billion, significantly below KeyBanc's estimate of $3.0 billion. "This is obviously positive for cash flow in the quarter, but there is a lingering question around the Company’s ability to secure the infrastructure that it needs to make sure the RPO flows into revenue in a timely fashion," the analyst wrote.

Stifel: Oracle recorded $1.1 billion worth of sequential RPO growth "during the seasonality light 1Q as AI driven bookings strength continued with 42 new GPU deals," Reback said in a note. Management reiterated their plans to double capex to around $15 billion, he added.

The company also projected Cloud Growth of more than 50%, "which would imply a significant acceleration on both parts from $2.3B and 45% in Q1, respectively," the analyst stated. "We believe continued revenue acceleration is likely as AI infrastructure bookings strength converts over-time and hyperscaler database partnerships scale medium-term," he further wrote.

JPMorgan: Oracle announced a multi-cloud partnership with Amazon.com Inc's AMZN AWS, similar to the ones with Microsoft Corp's MSFT Azure and Alphabet Inc's GOOG GCP, Murphy said. "Taken as a whole, while we'd prefer to see the Total Revenue upside driven more by recurring revenue," he added.

"Although the fiscal first-quarter results were "good overall," there likely is no material upside to consensus estimates as of now, the analyst stated. He expressed optimism around Oracle's ability to capitalize on AI training-related opportunities."

BofA Securities: "Oracle delivered another quarter of accelerating RPO growth (53% y/y from 44%) as the company continues to transition to the cloud," Sills wrote in a note. He added, however, that cRPO decelerated to 18%, from 33% in the previous quarter, suggesting that the fiscal first-quarter RPO "likely benefitted from duration and some larger Oracle DB migration deals."

"The outlook was somewhat mixed, with expected Q2 revenue growth of 8% cc below our 9%," the analyst said. Oracle would need to ramp up aggressively in the back half of the year to achieve its fiscal 2025 outlook for double digit growth, he further stated.

ORCL Price Action: Shares of Oracle had risen by 13.52% to $158.81at the time of publication on Tuesday.

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