Oracle shares rise as AI cloud backlog beats estimates

Oracle shares rose 5.5 per cent premarket on Friday after the cloud computing and software company’s stronger-than-expected quarterly results eased concerns around its massive debt-driven spending spree.

The Austin, Texas-based firm booked more than US$30 billion of additional AI cloud contracts in the first fiscal quarter, boosting its revenue backlog to $664 billion, above analyst estimates of $639.89 billion, according to data from Visible Alpha.

Oracle’s upbeat results follow a period of underperformance, as the company races to keep pace with hyperscale rivals, with mounting debt and squeezed cash flows raising doubts over when its massive AI spending will pay off.

The results should address key investor concerns including whether Oracle’s backlog growth can be sustained, its conversion into revenue amid data center delays, and the need for further capital raises, J.P. Morgan analysts said.

Its shares were down more than 21 per cent so far this year, compared with a nearly 11 per cent rise in the benchmark S&P 500 index.

“Oracle’s problem has not been finding customers, but proving that its enormous data center build-out can eventually generate enough cash to justify the cost. The results should nevertheless ease fears that Oracle is building ahead of demand,” said Lale Akoner, etoro market strategist.

Oracle is set to add about $24 billion in market value at the current share price of $161.3, if gains hold.

The stock trades at 16.86 times its forward earnings estimates, compared with Microsoft’s 23.84 multiple and Amazon’s 22.58, according to data compiled by LSEG.

Reporting by Kanchana Chakravarty in Bengaluru; Editing by Harikrishnan Nair, Reuters