Oracle Projections Analysts Stunned: “We’re All Kind of in Shock.”

Guggenheim Securities’ John DiFucci was “blown away.” TD Cowen’s Derrick Wood dubbed it a “momentous quarter.” Deutsche Bank’s Brad Zelnick confessed, “We’re all kind of in shock, in a very good way.”

These were the opening salvos from analysts during Oracle’s quarterly earnings call on Tuesday, as the company’s stock embarked on a 28% after-hours surge. While the software giant initially reported a miss on both earnings and revenue, that detail was quickly overshadowed by a much larger narrative.

Wall Street’s gaze shifted immediately to Oracle’s forward-looking projections, fueled by an anticipated growth spurt in its cloud infrastructure business and, crucially, new deals in the burgeoning artificial intelligence sector. This pivot represents a fundamental shift in investor sentiment, focusing on future potential rather than immediate results.

“There’s no better evidence of a seismic shift happening in computing than these results that you just put up,” Zelnick declared during the call, encapsulating the general feeling of industry observers.

Analyst praise is commonplace during earnings calls, particularly when a company exceeds expectations or offers an optimistic forecast. Executives are accustomed to receiving congratulations for strong quarterly performance. Yet, this Oracle call resonated differently, and the market understood why.

Based on after-market activity, Oracle’s stock is on track for its most significant single-session jump since the dot-com era of 1999. The shares, hovering around $310 in extended trading, are poised to shatter their previous record close of $256.43, achieved just last month. Such a surge would propel Oracle’s market capitalization past the $870 billion mark, placing it firmly among the tech titans.

The primary catalyst for this excitement lies in Oracle’s cloud infrastructure business, where it competes directly with industry heavyweights like Amazon, Microsoft, and Google. The company projects a staggering 77% revenue increase in this segment for the current fiscal year, escalating from $10 billion to $18 billion.

Looking further ahead, Oracle anticipates nearly doubling this figure to $32 billion in fiscal year 2027. Ambitious projections continue, forecasting $73 billion, $114 billion, and ultimately $144 billion in the subsequent three years, respectively. This aggressive growth trajectory hinges on not only infrastructure expansion but also capturing market share in the increasingly competitive AI cloud landscape.

CEO Safra Catz highlighted in the earnings statement the signing of four multi-billion-dollar contracts with three distinct clients within the quarter. Of particular note, OpenAI announced an agreement to collaborate with Oracle on developing 4.5 gigawatts of U.S. data center capacity.

Oracle’s remaining performance obligations (RPO), a key indicator of contracted revenue yet to be realized, experienced a monumental leap to $455 billion, a 359% surge compared to the previous year. This massive backlog signals strong future revenue streams and solidifies investor confidence.

TD Cowen’s Wood described the RPO figure as “just really amazing to see,” prompting him to seek further clarity from Catz on the capital expenditure (capex) required to build the infrastructure necessary to fulfill these obligations. This highlights a crucial aspect of Oracle’s strategy: managing the balance between aggressive growth and the associated capital investment.

Catz pointed out a key differentiator between Oracle and its competitors concerning data center property management.

“I know some of our competitors, they like to own buildings,” she stated. “That’s not really our specialty. Our specialty is the unique technology, the unique networking, the storage — just the whole way we put these systems together.” This statement suggests a strategic focus on core technological innovation and optimized infrastructure design, potentially leveraging partnerships for physical data center assets.

While the projected cloud revenue figure is undoubtedly impressive, some analysts caution that a portion of this growth might be attributed to a shift in strategy among the hyperscalers, Microsoft and Google, who are increasingly “offloading their capacity to other data center providers,” potentially driving customers toward Oracle’s offerings.

Ahead of Tuesday’s report, Oracle shares had already climbed 46% year-to-date, significantly outperforming the Nasdaq’s 13% gain. The market’s enthusiastic response to Oracle’s cloud and AI strategy underscores the company’s successful pivot and its potential to capitalize on the evolving technology landscape.