This ORCL Stock Forecast article was written by Milana Papadopoulou – Financial Analyst at I Know First.

Highlights

• ORCL is anticipated to show earnings growth in the December report
• ORCL is determined to focus on tailored cloud solutions and safeguarding sensitive data
• The stock is projected to reach $181 per share on average

Introduction

Oracle Corporation, founded in 1977 by Larry Ellison, Bob Miner, and Ed Oates, initially made its mark as a leader in relational database software. Its early success came from pioneering innovations in data management, which led Oracle to become one of the world’s largest software companies. Over the years, Oracle expanded its offerings to include enterprise resource planning (ERP), human capital management (HCM), and supply chain management (SCM) applications, establishing itself as a key player in enterprise technology.

Revenue Breakdown

Oracle’s Revenue could be broken down into four major segments: cloud services and license support [70%], cloud license and on-premises license [10%-15%], hardware [5%-10%] and consulting/advanced customer support services [5%]. 

The Cloud Services sector is the largest one, and it has also been the biggest growth driver in recent years. It includes revenues from cloud infrastructure and applications, such as SaaS, PaaS, and IaaS, as well as support services for databases and middleware products. The firm has also long been dominant in the on-premises database software for the enterprise sector, where it has a large market share. 

Cloud Infrastructure Expansion

Oracle’s flagship cloud platform, Oracle Cloud Infrastructure (OCI), is designed to compete with market leaders AWS, Azure, and Google Cloud. Despite holding a smaller market share, OCI is gaining traction due to its high performance, cost efficiency, and specialised tools. The growing demand for hybrid and multi-cloud solutions is another advantage, as more businesses are looking to avoid lock-in with a single provider.

Database Software

Oracle’s leadership in database technology remains unmatched, with its Autonomous Database solution offering unparalleled reliability, security, and ease of use. As businesses worldwide continue to depend on Oracle for their database needs, this sector is expected to drive steady revenue. The firm has also been investing heavily in AI tools for database management. Despite staunch competition in the sector, Oracle has had favours with clients by introducing industry-specific tools.

Individual Approach

Oracle is aware of competitive pressure in the cloud industry and has a smaller market share than giants like Amazon, Microsoft, and Google. This is why it needs to differentiate from the competition by offering tailored cloud services. Oracle’s acquisition of Cerner, a major player in health IT, aims to establish Oracle as a leader in health data management. The firm also continues to build strategic alliances, such as its partnership with Microsoft. It provides OCI customers with the ability to integrate with Microsoft Azure’s suite, appealing to enterprises seeking interoperability. This means that its product will be significantly more efficient at meeting the needs of specific clients

Risks

The biggest risk for Oracle lies in the competitive pressure exerted by other firms in the cloud sector. Despite their unparalleled dominance in the database software market, the recurring revenues from license sales have been declining sharply. The provision of cloud infrastructure is a much less defined business segment for Oracle, where they face competition from well-established firms. As their legacy revenues decline, they must be able to compensate with cloud growth of equal magnitude. 

Management

Oracle’s management has been pivotal in the company’s evolution from a software giant to a significant player in cloud computing. Co-founder Larry Ellison, now Chairman and CTO, continues to shape Oracle’s strategic vision. They are focusing heavily on cloud infrastructure (OCI) and database technology. His competitive approach and dedication to innovation have been key to Oracle’s product advances, including the Autonomous Database. 

Safra Catz, Oracle’s CEO since 2014, is known for enforcing financial discipline, emphasising cost control, strategic acquisitions, and share buybacks, all of which have contributed to Oracle’s strong profitability and steady revenue growth.

Recent Deals

Oracle has recently secured several large contracts. One of the most prominent is with the U.S. Department of Defense (DoD) as part of the Joint Warfighting Cloud Capability (JWCC) contract. In this contract, Oracle, alongside Microsoft, Amazon, and Google, will provide multi-cloud services to support the defence agency’s mission-critical operations. This contract, along with one with various US healthcare organisations, conveys trust in Oracle’s ability to safeguard sensitive and private data. 

Earnings Projections

Oracle’s revenue has shown moderate growth, with the pace picking up in the last few quarters. This is another indicator of the success of its cloud ventures and the consequences of its investments and acquisitions. The profit margin has remained steady, indicating that the shift towards cloud instances over on-premises software sales has not harmed profitability. Another significant success comes from high free cash flow levels, reaching $5.1b in the first quarter. 

The analysts project the earnings to stay on the growth path, increasing at a moderate rate in the next quarter. This growth is expected to accelerate as Oracle continues to invest heavily in expanding OCI data centres and enhances its offerings with AI-powered solutions, such as the Autonomous Database.

Analysts’ Views

The analysts’ views on the stock are bullish. Solid financial performance has pushed the price up in the last quarter. Numerous articles have emerged naming Oracle the next go-to AI stock. However, with the price trending upwards, there have been concerns emerging that the stock is overbought. Nevertheless, analysts believe that it will continue on an upward trajectory for the foreseeable future. 

Conclusion

I believe that ORCL stock is a “Buy”. Its strategic investments, acquisitions and fiscal discipline are bound to deliver consistent earnings growth. Despite stark competition in the cloud sector, they are anticipated to deliver positive results in their next quarterly report in December, which would give the stock yet another push to stay on the positive slope. Consistent quarterly cash flow also allows them to pay stable dividends and conduct stock buybacks, which is a beneficial notion for investors. 

It is worth paying attention that the stock-picking AI of I Know First has a high signal on the one-year market trend forecasts, supporting my position for the ORCL stock forecast. The light green for the short-term forecasts is mildly bullish, while the darker green is a strong bullish signal for the one-year forecast.

Past Success with ORCL Stock Forecast

I Know First has been bullish on the ORCL stock forecast in the past. On August 4^th, 2024 the I Know First algorithm issued a forecast for ORCL stock price and recommended ORCL as one of the best tech stocks to buy. The AI-driven ORCL stock prediction was successful on a 3-month time horizon, resulting in more than 27.24%.

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Please note-for trading decisions use the most recent forecast.