Massive News for Oracle Stock Investors – The Motley Fool

Oracle (ORCL -1.23%) While it’s not the largest cloud service provider, it’s one of the fastest-growing today. Once best known for database management, the company has been focusing on growing its cloud presence and serving artificial intelligence (AI) customers. The effort has paid off, with the company seeing a recent surge in demand and cloud infrastructure revenue.

In fact, in its quarterly report this week, Oracle announced that its cloud infrastructure revenue grew 42% to $2 billion, and it expects full-year revenue to grow by double digits based on current demand for AI. The company is attracting customers (it has signed its largest-ever deals in the past two quarters) and showing that it can compete with the larger cloud service providers. Additionally, Oracle announced some big news for the company and its shareholders. Let’s take a closer look.

Oracle’s focus on cloud infrastructure

As mentioned above, Oracle has been expanding and strengthening its cloud infrastructure offerings to focus on serving AI customers, which led the company to close its largest sales deal to date in the most recent quarter from customers looking to train language models at scale. During the quarter, Oracle closed approximately 30 AI deals worth more than $12 billion.

That demand is driving up Oracle’s remaining performance obligations (RPOs), or the revenue it expects to receive from contracted services, which rose 44% to $98 billion in the quarter, and the company says it sees momentum continuing, giving it reason to be optimistic about revenue in future quarters.

Now, on to the big news that adds to the optimistic outlook: Oracle announced two significant AI deals involving some of the biggest names in the market, marking Oracle’s entry into the ranks of today’s leading AI companies. OpenAI, creators of the popular chatbot ChatGPT, will run its deep learning and AI workloads on Oracle Cloud infrastructure; and alphabetGoogle has entered into a multi-cloud partnership with Oracle to make it easier for customers to deploy projects on both clouds. As part of the agreement, Oracle will offer “Oracle Database at Google Cloud” starting in September.

These two deals in particular should help Oracle stand out and gain market share in the high-growth field of AI. The company’s progress in winning contracts has been promising, and these deals could add to that momentum.

A leader in “multi-cloud” partnerships

Oracle may have a smaller cloud footprint than its rivals, but the benefits it offers are recognized, and its deal with Google is the latest multi-cloud partnership following previous deals. MicrosoftThese contracts offer flexibility to customers, which is a big plus. But that’s not all: Oracle also offers other solutions, such as Sovereign Cloud and Oracle Alloy, which customers can use to run their own Oracle-based cloud. Oracle is also known for competitive pricing, generally lower than competitors, which is another plus for winning contracts.

So, on top of Oracle’s dominance and recent revenue growth from its cloud business, these deals with OpenAI and Alphabet are further good news for the company and its investors. After Oracle announced the deals, its stock price rose more than 13% in a single trading session to an all-time high.

Of course, this is only a short-term stock price movement, but it’s not a sudden event. Oracle shares are already gaining momentum, up 20% over the past year, and the stock could continue to rise if Oracle continues to grow revenue, expand capacity, and partner with other major cloud providers.

Is it too late to get in on the Oracle AI growth story? Not at all. The company’s stock is trading at just 22 times forward earnings, which is a real bargain considering all the points I’ve made above. So buy this tech company on the cheap now and celebrate the big news Oracle recently announced – news that equates to long-term growth in earnings and stock price.