To The Moon

In the first quarter of fiscal 2025, $Oracle (ORCL)$ demonstrated strong performance, with favorable growth rates in its cloud business, and announced partnerships with $Amazon (AMZN)$ and $Google A(GOOGL)$. $Google (GOOG)$ partnership, jumping 8% after hours.

Performance

• Oracle's revenue for the quarter totaled $13.3 billion, up 8% year-over-year and ahead of market expectations of $13.24 billion.

• Cloud services revenue reached $5.6 billion, up 22 percent year-over-year, slightly below market expectations of $5.61 billion.

  • Infrastructure revenue increased 45 percent year-over-year to $2.2 billion, demonstrating strong market demand.

  • Applications revenue grew 10 percent year-over-year to $3.5 billion, demonstrating continued enterprise demand for Oracle applications.

  • Fusion Cloud ERP revenue grew 16 percent to $900 million, demonstrating its competitiveness in the ERP space.

• Gross Profit and Operating Income: Gross profit from cloud services and license support increased 9%, operating income increased 14%, and operating margin was 43%.

• Earnings per share: non-GAAP EPS was $1.39, up 17% year-over-year and above market expectations of $1.33, while GAAP EPS was $1.03, up 20% year-over-year.

• Remaining Performance Obligations (RPO): RPO reached $99 billion, up 52% year-over-year, with cloud RPO up more than 80%.

  

Company Guidance

For Q2 results, the company has given the following guidance

• Total Revenue: total revenue is expected to grow between 7% and 9% (currency neutral), or 8% to 10% in dollar terms.

• Cloud Revenue: expected to grow between 23% and 25% (currency-neutral), or 24% to 26% in U.S. dollar terms.

• Non-GAAP EPS: Non-GAAP EPS is expected to grow between 6% and 10%, with a projected range of $1.42 to $1.46 (currency-neutral), and is projected to grow $0.08 to $0.12 in U.S. dollars, with a range of $1.45 to $1.49.

Currency factors are expected to have a positive impact of approximately 1% on total revenue and approximately $0.03 on earnings per share if currency exchange rates remain constant.

Investment Highlights

1. The company announced strategic partnerships with Amazon Web Services (AWS) and Google Cloud, focusing on cloud computing services and database migration

   1. Oracle Database@AWS: Customers are able to use Oracle Database on Amazon Web Services (AWS), providing greater flexibility and scalability.

   2. Amazon RDS for Oracle: Amazon continues to offer users support for Oracle Database through its Relational Database Service (RDS).This enables organizations to more easily migrate existing Oracle databases to the cloud while leveraging other AWS services to enhance their database performance and manageability.

   3. Migration Services: AWS provides Database Migration Services (DMS) to support the migration of Oracle databases to AWS environments, helping organizations transform cloud computing, reduce costs and improve performance.

   4. Migration of Oracle workloads to Google Cloud Platform enables organizations to leverage the high availability and global consistency of Google Cloud to run their Oracle applications.

   5. Google Cloud provides enterprises with a solution to modernize their Oracle applications, combining Google Cloud's artificial intelligence and machine learning capabilities to help customers improve business efficiency and data analytics.

2. On the impact of OCI (Oracle Cloud Infrastructure) in particular on overall margins in Oracle's cloud business.The company believes that while OCI's revenue growth has been significant, its margins have been relatively low, but gross margins have been gradually improving as OCI has grown in size.Its high level of automation can reduce operating costs and thus improve overall gross margins.

3. Plans for future capital expenditures.Capital expenditures were $2.3 billion in Q1 and are expected to be twice as high in fiscal 2025 as they were in 2024 to meet growing demand.Meanwhile, Oracle is building 162 cloud data centers globally and plans to expand further to support the growing demand for AI and cloud computing.