Oracle (NYSE:ORCL) is emerging as a potential AI stock pick, with a focus on cloud services and a history of stable earnings. Despite not being in the limelight like some AI giants, Oracle is making strides in the AI space and could be an attractive investment opportunity for growth-minded investors.
Founded in 1977 and headquartered in Austin, Oracle specializes in enterprise software, cloud computing systems, and computer hardware. With a market cap of $342.24 billion, Oracle has shown resilience in its financial performance, with revenue and earnings growing at a compound annual growth rate (CAGR) of 5.92% and 6.69%, respectively, over the past five years.
In its most recent fiscal quarter, Oracle reported a 7% increase in revenue to $13.3 billion, driven by strong growth in its core cloud services and license support business, which accounted for over 75% of total revenues. The company’s earnings per share (EPS) also rose by 16% year-over-year to $1.41, surpassing analysts’ estimates.
Oracle’s strong financial performance is backed by its strategic focus on AI. The company has been investing in AI technologies to enhance its cloud offerings and has recently secured a $10 billion cloud contract with xAI, an AI startup led by Elon Musk. Additionally, Oracle has partnered with data analytics company Palantir to offer AI solutions to governments and businesses.
One of Oracle’s key strengths in the AI space is its RDMA interconnected NVIDIA Superclusters, which are used to train AI models at twice the speed and less than half the cost of other clouds. The company is also innovating in AI by training models directly on customer data, within their own infrastructure, which enhances privacy, security, and accuracy.
Oracle’s Fusion Cloud Applications Suite, which includes ERP, EPM, SCM, HCM, and Customer Experience tools, has integrated generative AI features. This approach has attracted at least 40 new billion-dollar AI contracts that have yet to be implemented, demonstrating the value of Oracle’s AI offerings.
Analysts are optimistic about Oracle’s prospects, with a mean target price of $136.39, representing a potential upside of about 9.5% from current levels. Out of 29 analysts covering the stock, 17 have a “Strong Buy” rating, indicating confidence in Oracle’s ability to capitalize on the AI opportunity.
In conclusion, Oracle’s focus on AI, coupled with its strong financial performance and strategic partnerships, makes it a compelling investment option for those looking to gain exposure to the AI sector.
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