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Oracle (NYSE: ORCL) recently reported its fourth-quarter results that missed estimates. But despite the weak results, the market was impressed given the strong Oracle Cloud Infrastructure (OCI) demand that it is seeing coming its way.

Oracle’s Financials
Revenue for the fourth quarter grew 3% to $14.29 billion, below analyst estimates of $14.55 billion. Net income was $3.14 billion, or $1.11 per share, down from $3.32 billion, or $1.19 per share a year ago. On an adjusted basis, EPS of $1.63 was lower than the market’s forecast of $1.65.By segment, its cloud services and license support revenues grew 9% to $10.23 billion, below the market consensus of $10.29 billion. Its cloud and on-premises licenses business contributed $1.84 billion in revenue, falling 15% over the year, and missing the $2.09 billion consensus. Cloud infrastructure revenue grew 42% to $2 billion.Oracle ended the year with revenues growing 6% to $53 billion. Cloud services and license support revenues were up 12% to $39.4 billion. Cloud license and on-premise license revenues were down 12% to $5.1 billion. Adjusted net income was $15.7 billion or $5.56 per share.For the first quarter, Oracle projected revenue growth to be 5%-7%, compared with the analyst estimates of 7.6%. It also expects adjusted profit of $1.31-$1.35 per share, compared with estimates of $1.32.

Oracle’s AI Focus
The OCI segment accounted for a modest $2 billion revenue in the last quarter. But it is a big part of its longer-term effort to compete with Amazon and Microsoft. It is also becoming an essential cog to win more AI business as AI enterprises require vast amounts of computing power to train and run algorithms. As part of its OCI revenue, Oracle rents cloud computing servers and storage to these enterprises. It is helping deliver on Oracle’s strategy of transitioning from legacy database provider to cloud services company.Oracle is seeing a significant expansion in its AI-focused bookings. In the last two quarters, it claims to have signed the largest sales contracts in its history that were driven by the increased demand for training AI large language models in the Oracle Cloud. During the last quarter, it signed over 30 AI sales contracts, adding up to more than $12.5 billion – including a contract with OpenAI to train ChatGPT in the Oracle Cloud. These record level sales drove Remaining Performance Obligation (RPO) up 44% to $98 billion. Oracle expects the strong AI demand to continue in the coming year to help push Oracle’s RPO higher to drive double-digit revenue growth in the current fiscal year.It also expanded its multi-cloud cooperation with Microsoft with an agreement to work together to support OpenAI and ChatGPT. Of the 23 OCI datacenters that Oracle is building inside Azure, 11 have gone live. The increased capacity will help customers run every version of the Oracle database in both the Azure and the Oracle Clouds. Oracle also recently signed an agreement with Google to interconnect its clouds and initially build 12 OCI datacenters inside the Google Cloud. It expects its database to be available within the Google Cloud in September this year.Last year, Oracle had entered into an AI-focused agreement with Cohere to develop generative AI services aimed at helping companies automate their business processes. The agreement would integrate the OCI with Cohere’s large language models (LLMs) and expertise in natural language processing (NLP). Cohere chose to train and deploy its models on OCI to leverage a complete, end-to-end platform for generative AI with advanced security and a comprehensive portfolio of cloud applications. By offering these combined capabilities in an intelligent Conversational Cloud solution, OCI customers will be able to deploy generative AI solutions for improved service delivery.Oracle’s stock is trading at $140.17 with a market capitalization of $384.8 billion. It was trading at a 52-week high of $146.59 in June. The stock hit a 52-week low of $99.26 in December last year. More By This Author:AI Unicorns: xAI Racing To Catch-Up With OpenAI
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