ORCL Earnings Preview: Investors look for evidence of sustainability
3min read Oracle (ORCL) is set to report its fiscal second-quarter (Q2) results today, December 11, after the market close, with the conference call scheduled for 5:00 PM ET. Analysts expect non-GAAP EPS to rise by 10% year-over-year to $1.48, within the company's guidance range of $1.31-$1.35. Revenue is projected to grow 9% year-over-year to $14.12 billion. Oracle typically provides quarterly guidance during its earnings call, so updates on future revenue and EPS will be critical to monitor for the stock's near-term trajectory.
A key metric to watch will be Oracle's remaining performance obligations (RPO), which reached a record $99 billion last quarter, with cloud RPO growing over 80% and accounting for nearly 75% of the total. Investors will be keen to see whether this strong backlog momentum continues, signaling robust demand for Oracle's cloud infrastructure (OCI) and SaaS offerings. Other important metrics include OCI growth, expected to exceed 52%, and updates on operating margins, which analysts expect to remain strong at around 43%.
Oracle's key themes center around its ongoing cloud transformation, its competitive positioning in AI-enabled services, and its valuation. The company has benefited from strong demand for its cloud products, particularly OCI and its SaaS offerings like Fusion and NetSuite. Analysts are optimistic about Oracle's ability to sustain double-digit growth in cloud revenue as more enterprises transition from on-premise IT systems to cloud-based solutions. Additionally, Oracle's AI strategy—embedding AI capabilities into its platforms—has been a meaningful differentiator, helping to drive migrations to its SaaS products.
Despite its strong momentum, Oracle’s stock has a high bar to clear due to elevated expectations following a bullish September analyst day and a recent string of share price gains. Analysts note that while sentiment remains positive, the stock’s high valuation, combined with lofty guidance expectations, could limit upside potential unless Oracle significantly exceeds expectations or provides particularly strong guidance. At its current valuation, the stock is priced for strong execution, making tonight’s report a critical juncture for its ongoing rally.
Oracle's Q1 earnings report exceeded expectations across several key metrics, reinforcing its strong performance in cloud infrastructure and strategic partnerships. The company reported adjusted EPS of $1.39, surpassing the $1.32 consensus estimate, and adjusted revenue of $13.31 billion, slightly ahead of the $13.26 billion forecast. Cloud services and license support revenue grew 10% year-over-year to $10.52 billion, while cloud infrastructure revenue (IaaS) increased 45% year-over-year to $2.2 billion, reflecting strong demand for Oracle's cloud solutions. The announcement of a strategic partnership with Amazon Web Services (AWS) further bolstered investor confidence, with shares rising 5.7% post-market.
Analysts reacted positively to the results, with many highlighting Oracle's accelerating growth trajectory in cloud infrastructure and AI-driven services. Piper Sandler pointed to three consecutive quarters of cRPO growth acceleration and raised its price target to $175, emphasizing Oracle's multi-cloud partnerships and OCI momentum. UBS and TDCowen also praised the strong RPO growth, which reached $99 billion, up 53% year-over-year, underscoring robust booking strength in AI infrastructure. Analysts broadly view Oracle's execution as a "clearing event" that solidifies its growth story, with several firms raising price targets based on the company's ability to sustain double-digit growth in cloud revenue.
Key themes of interest for analysts included Oracle's multi-cloud strategy, partnerships with major hyperscalers like AWS, and the durability of its AI-driven demand. The announcement of 42 new GPU deals worth $3 billion during Q1 highlights the company’s strategic positioning in the rapidly growing AI market. Analysts also noted Oracle's efforts to enable database migration across Azure, Google Cloud, and AWS, which they see as a "run anywhere" strategy that expands Oracle's addressable market. This shift is expected to provide a long-term boost to Oracle’s IaaS and SaaS businesses, as customers increasingly migrate from on-premise to cloud environments.
Despite the positive results, some analysts expressed caution about the ambitious CAPEX plans, which involve doubling cloud-related spending to $15 billion in FY25. Stifel noted that while Oracle's booking strength supports its revenue growth targets, supply constraints could challenge its ability to scale cloud infrastructure as quickly as planned. However, Oracle's management reiterated its confidence in achieving over 50% cloud growth in FY25, which would represent a significant acceleration.
In summary, Oracle's earnings report will be closely scrutinized for further evidence of its growth acceleration, particularly in cloud infrastructure and AI-enabled services. Key risks include potential competition in OCI and concerns about the sustainability of recent growth drivers. Nevertheless, Oracle’s strong RPO backlog, expanding cloud infrastructure, and differentiated AI strategy position it as a leader in its space, with analysts maintaining generally bullish outlooks and price targets in the range of $200-$220.
Investors will look to tonight’s report and guidance for clarity on whether Oracle can sustain its strong trajectory.
