Explained: What’s behind the Oracle rally

Oracle reported a massive increase in contract bookings for its cloud infrastructure, due to rising artificial intelligence (AI) workloads. The company’s Remaining Performance Obligations (RPO), the most popular measure of booked revenue, jumped by 359% year-over-year to about $455 billion. This backlog indicates a multi-year growth runway as more and more enterprises adopt AI across industries.

“Over the next few months, we expect to sign up several additional multi-billion-dollar customers and RPO is likely to exceed half-a-trillion dollars,” CEO Safra Catz said during a post-earnings call.

Microsoft, Amazon Web Services and Google Cloud currently rule the cloud computing market with a combined 65% share. Oracle, Alibaba, CoreWeave and others hold a smaller share.

Oracle added around $230 billion to its market valuation, taking the total to around $922 billion, as of Thursday morning. If the gains hold, it might take the company closer to the coveted $1 trillion-dollar club.

Financials

Oracle missed market expectations for first-quarter revenue on Tuesday. Revenue for the quarter stood at $14.93 billion, compared with analysts’ average estimate of $15.04 billion.

The company said it had signed four multi-billion-dollar contracts with three different customers in the first quarter, driving a 12% increase in revenue.

The company projected that its cloud business revenues would surge 77% in the current fiscal year to $18 billion. In subsequent years, revenues are expected to rise to $32 billion, $73 billion, $114 billion, and $144 billion.

Strategic deals

Oracle has secured large multi-billion-dollar contracts with major AI companies. It has entered into deals with Amazon, Alphabet and Microsoft to let their cloud customers run Oracle Cloud Infrastructure (OCI) alongside native services.

Analysts also highlighted Oracle’s role in SoftBank and OpenAI’s Stargate project as another tailwind. The company also supplies cloud services to Musk’s xAI.

Separately, it was reported on Wednesday that OpenAI and Oracle signed a deal for the former to purchase $300 billion in computing power from the latter over five years, in one of the biggest cloud contracts ever signed.

What we know

Ellison briefly became the richest man in the world, when the Oracle rally took his net worth up $101 billion to around $395.7 billion, ahead of Musk at $385 billion, according to the Bloomberg Billionaires Index. Ellison owns a 41% stake in Oracle.

ET reported that the company has begun streamlining its operations in some markets. Oracle has laid off some Indian staff, impacting about 100 employees across teams so far, in a cost cutting measure.