Oracle Corp (ORCL) stock climbed in early trading on Tuesday, fueled by a strong first-quarter earnings report. The company’s results came amid an exciting earnings season, and analysts were quick to weigh in with their interpretations.
JMP Securities analyst Patrick Walravens upgraded Oracle’s rating to Market Outperform, setting a price target of $175. He cited the company’s better-than-expected results, which included non-GAAP earnings of $1.39 per share, exceeding the consensus estimate of $1.32. Walravens also highlighted the impressive operating margins of 42.9%, outperforming the anticipated 42.2%. Revenue for the quarter reached $13.31 billion, surpassing the consensus of $13.20 billion, and showing an accelerated year-over-year growth of 7%, up from the previous quarter’s 3%. The analyst also noted the impressive growth in remaining performance obligation (RPO), which climbed to $98 billion, representing a 53% year-over-year increase, accelerating from the last quarter’s 44% growth. Management’s guidance for the fiscal second quarter was positive, projecting non-GAAP earnings of $1.45-$1.49 per share, surpassing the consensus of $1.47. Revenue guidance aligned with expectations.
KeyBanc Capital Markets analyst Jackson Ader maintained an Overweight rating on Oracle but raised his price target from $165 to $175. While acknowledging the impressive RPO growth, Ader pointed out that the growth rate was against an easy comparable from the previous fiscal year and slowed considerably on a two-year basis. Nevertheless, he believes this growth is sufficient to offset concerns regarding Oracle Cloud Infrastructure (OCI) recognized revenue. Ader noted that Oracle’s capital expenditures (capex) at the start of the quarter were $2.3 billion, significantly lower than KeyBanc’s estimate of $3.0 billion. This development is positive for cash flow in the quarter but raises questions about Oracle’s ability to secure the infrastructure necessary to convert RPO into revenue in a timely manner.
Stifel analyst Brad Reback maintained a Hold rating on Oracle but raised his price target from $135 to $155. Reback highlighted Oracle’s sequential RPO growth of $1.1 billion during the first quarter, driven by continued strength in AI-driven bookings, including 42 new GPU deals. Management reiterated their plans to double capex to around $15 billion, and the company projected cloud growth of over 50%. Reback believes that continued revenue acceleration is likely as AI infrastructure bookings convert over time and hyperscaler database partnerships scale in the medium term.
JPMorgan analyst Mark Murphy reiterated a Neutral rating on Oracle and maintained a price target of $120. He noted Oracle’s announcement of a multi-cloud partnership with Amazon Web Services (AWS), joining similar partnerships with Microsoft Azure and Google Cloud Platform (GCP). While Murphy acknowledges the positive aspects of the results, he expressed a preference for seeing more of the revenue upside driven by recurring revenue. He believes that while the fiscal first-quarter results were generally positive, there is likely no material upside to consensus estimates at this point. However, Murphy expressed optimism about Oracle’s ability to capitalize on AI training-related opportunities.
BofA Securities analyst Brad Sills reiterated a Neutral rating and raised his price target from $155 to $175. Sills commended Oracle’s continued transition to the cloud, evidenced by another quarter of accelerating RPO growth (53% year-over-year from 44%). However, he noted that the deceleration in contract RPO (cRPO) to 18%, down from 33% in the previous quarter, suggests that the first-quarter RPO may have benefited from deal duration and some larger Oracle database migration deals. While the outlook was mixed, with expected second-quarter revenue growth of 8% below their 9% estimate, Sills acknowledged that Oracle would need to ramp up aggressively in the latter half of the year to achieve its fiscal 2025 outlook for double-digit growth.
By the time of publication on Tuesday, Oracle’s stock price had surged 13.52% to $158.81.
