Oracle Earnings Top Street As Cloud Revenues Surge, Margins Improve

Updated at 4:17 pm EDT

Oracle Corp.  (ORCL) - Get Free Report posted stronger-than-expected fourth quarter earnings Monday, thanks in part to double-digit sales growth in its cloud services division that helped power full-year revenues to a record $50 billion.

Oracle, which earns the bulk of its revenues from its cloud services and license support unit, topped Street earnings forecasts by 9 cents with an adjusted second bottom line of $1.67 per share,  

Group revenues, Oracle said, were up 16.6% to $13.8 billion, again topping analysts' estimates of a $13.73 billion tally. Cloud services revenues were up 23% to $9.4 billion while cloud license and on-premise license revenues were down 15% to $2.2 billion.

The group's operating margin also improve by 200 basis points from the prior quarter to 44%.

"Oracle's revenue reached an all-time high of $50 billion in FY23," said CEO Safra Catz. "Annual revenue growth was led by our cloud applications and infrastructure businesses which grew at a combined rate of 50% in constant currency."

"Our infrastructure growth rate has been accelerating—with 63% growth for the full year, and 77% growth in the fourth quarter," he added. "Our cloud applications growth rate also accelerated in FY23. So, both of our two strategic cloud businesses are getting bigger—and growing faster. That bodes well for another strong year in FY24." 

Oracle shares were marked 3.2% higher in after-hours trading immediately following the earnings release to indicate a Tuesday opening bell price of $120.14 each, a fresh all-time high that would value the group at just over $320 billion.

Oracle, which accelerated its earnings potential last year with the $28 billion purchase of Cenrer CERN, the second-largest designer of software used by doctors and hospitals to mange and store medical records, is set to become one of the early beneficiaries of the buildout in AI spending following a partnership with chipmaker Nvidia NVDA it inked in March.

The deal makes Oracle the first public cloud company to offer both DGX Cloud and Nvidia AI Foundations to its broader offerings, and builds on a deal from October of 2022 that added thousands of Nvidia chips to Oracle Cloud Infrastructure (OCI), its umbrella division.

The partnership effectively means companies can 'rent' Nvidia's supercomputers, and their AI design capabilities, through Oracle's cloud business and its Remote Direct Memory Access, or RDMA technology, which facilities fast data transfers between computer systems.