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Oracle surpasses quarterly profit expectations driven by increased demand for AI, leading to a surge in shares

Oracle (ORCL.N) announced on Monday a forthcoming joint announcement with chip-giant Nvidia (NVDA.O) as it exceeded expectations for quarterly profit, driven by the increasing demand for generative AI. This news propelled its shares up by nearly 14% during after-hours trading.

The late surge in Oracle’s stock added over $40 billion to its market value, showcasing strong investor confidence in the company’s performance.

As a 46-year-old database giant, Oracle has been actively seeking to transform itself into a cloud-computing provider, aiming to offer services at competitive prices compared to industry rivals like Amazon.com (AMZN.O).

To bolster demand for its subscription plans, Oracle has forged partnerships with competitors such as Microsoft (MSFT.O) and leading AI chip manufacturer Nvidia. Nvidia’s chips power supercomputers and are utilized by customers of Oracle’s cloud service.

Oracle’s CEO, Safra Catz, highlighted the substantial demand for its Gen2 AI infrastructure, which significantly exceeds the available supply. Despite rapidly expanding its cloud datacenters, Oracle continues to secure large contracts for cloud infrastructure capacity.

During discussions with analysts, Oracle executives emphasized Nvidia multiple times and hinted at an upcoming joint announcement with the chip-maker in the following week.

Excluding exceptional items, Oracle reported a profit of $1.41 per share for the third quarter, marking a 16% increase from the previous year and surpassing LSEG estimates of $1.38 per share.

Although the quarterly results met expectations, investors expressed enthusiasm about the new business Oracle secured during the period. Gil Luria, a research analyst at D.A. Davidson, noted that the growth in Remaining Performance Obligations, a key metric for booked revenue, was up by 29% year-on-year, indicating positive prospects for future results.

However, Oracle’s revenue for the three months ended February 29 fell slightly below analysts’ average estimate of $13.30 billion, coming in at $13.28 billion.

Looking ahead, Oracle provided a revenue growth forecast of 4%-6% for the current quarter, which was slightly below analysts’ average estimate of approximately 6.5%, according to LSEG data. Despite this, Oracle remains optimistic about its future performance and continues to position itself as a key player in the cloud-computing and AI sectors.

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