Oracle stock soared on Thursday, driven by a positive earnings forecast from boutique equity research firm Cleveland Research. The stock jumped 3.4% to $115.69, outperforming the Nasdaq Composite's 1% movement for the day and bringing its year-to-date gain to 9%.
According to analysts Ari Terjanian and Max Lenhardt, who released a research note, feedback from Oracle partners indicates an improvement in demand compared to the company's previous fiscal quarter that ended in November. The analysts also noted an increase in new business signings, particularly from artificial intelligence customers and the Oracle Cloud Infrastructure unit.
Terjanian and Lenhardt further stated, "We believe ORCL has seen some improvement in AI signings, potentially tied to improved supply availability."
In addition, Oracle partners are hiring additional staff to handle the growing backlog of work and expectations for higher demand. It's worth noting that Oracle is gaining market share both in enterprise apps and the cloud.
The expanded partnership with Microsoft is also benefiting Oracle, as there has been an increase in signings related to the collaboration. In December, Oracle made its database software available on the Microsoft Azure cloud. The analysts reported "strong growth" in migrations from on-premise versions of Oracle application software to the Oracle cloud.
Looking ahead to the February quarter, Terjanian and Lenhardt forecast revenue of $13.41 billion, an 8.1% increase from the previous year and higher than the Street consensus of $13.29 billion. They also anticipate earnings of $1.39 per share for the period, which is one cent higher than the consensus estimate.
For the May 2024 fiscal year, the analysts' projections for both revenue and earnings surpass consensus estimates.
"We see upside to estimates over the next couple of years and reiterate our Buy rating," wrote Terjanian and Lenhardt. They added that Oracle's forecast of $65 billion in revenue for fiscal year 2026, with 10% annualized per-share earnings growth, appears to be reasonable.