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Oracle: Cautiously Optimistic Going Into Earnings
ORCLOracle(ORCL) Seeking Alpha·2024-09-08 17:03

Core Viewpoint - Oracle Corp. is expected to report strong earnings for Q1 FY25, with analysts showing optimism reflected in revised EPS forecasts [1][3]. Upcoming Quarter's Earnings - Analysts estimate a 6% growth in revenue for Q1 FY25, projecting earnings per share (EPS) at 1.33,whileOracleisexpectedtogenerate1.33, while Oracle is expected to generate 13.3 billion in revenue with an adjusted EPS of 1.36,slightlyaboveconsensus[3].−InstitutionalinvestorshavebeennetbuyersofOracleshares,indicatingsignificantinterestinthecompany′sexpansioninAIandcloudservices[2].FinancialPerformanceandValuation−Oraclesharesarecurrentlytradingat15.84xforwardEV/EBITDA,whichisapremiumcomparedtoGoogleandAmazonbutdiscountedrelativetoMicrosoft[5].−ThecompanyhasoutperformedtheNASDAQIndexby241.36, slightly above consensus [3]. - Institutional investors have been net buyers of Oracle shares, indicating significant interest in the company's expansion in AI and cloud services [2]. Financial Performance and Valuation - Oracle shares are currently trading at 15.84x forward EV/EBITDA, which is a premium compared to Google and Amazon but discounted relative to Microsoft [5]. - The company has outperformed the NASDAQ Index by 24% year-to-date [11]. Growth Strategy - Oracle is rapidly expanding its AI factory presence, with plans to build 100 new data centers to meet local data privacy laws and government contracts [5]. - The Cloud Services segment is projected to grow to a 25 billion business in FY25 and exceed $33 billion by FY26 [6]. Market Conditions - The availability of GPUs has improved, which is expected to support Oracle's data center expansion and enhance its cloud services [7]. - Despite the positive outlook, there are concerns regarding the macroeconomic environment, which may impact demand for Oracle's services [10]. Operational Insights - Oracle's data centers are designed to be autonomously managed and modular, allowing for scalability and integration of all Oracle software services [8]. - The company is well-positioned to capitalize on the growing demand for GPUs within its hosted data centers, which is expected to drive growth in cloud services [9].