Software giant Oracle (NYSE:ORCL) will report its first quarter Fiscal year 2024 results after the market closes today. Despite macro uncertainty, the company is witnessing unprecedented demand for its cloud services, especially its artificial intelligence (AI) services, which are expected to support Fiscal Q1 revenues and boost earnings.
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The company highlighted during the Fiscal Q4 2023 conference call that its cloud data centers have a high-bandwidth and low-latency Remote Direct Memory Access (RDMA) network, which is best suited for building the large-scale graphics processing unit (GPU) clusters used to train generative large-language models. Thus, its Gen2 Cloud has emerged as the top choice for AI development companies to train their large language models, providing significant growth opportunities for Oracle.
With this backdrop, let’s look at analysts’ consensus estimates for Q1 FY24.
Q1 Earnings: Analysts’ Expectations
Analysts expect Oracle to report total revenue of $12.45 billion in Q1 FY24, compared to $11.4 billion in the prior-year quarter. The year-over-year growth reflects continued strength in the company’s cloud business. The company expects its total cloud revenue, excluding Cerner (which it acquired last year), to increase by 28% to 30% on a constant currency basis in Q1 FY24.
Citing the momentum in its cloud infrastructure and AI demand, Jefferies analyst Brent Thill increased the price target for Oracle stock to $145 from $135 on September 7. The analyst maintained a Buy rating on ORCL stock.
Echoing similar sentiments, Siti Panigrahi of Mizuho Securities remains upbeat about Oracle stock ahead of Q1 FY24 earnings. In a note to investors dated September 6, Panigrahi said that he expects the company to deliver strong Q1 FY24 results, led by its cloud business.
Meanwhile, Monness analyst Brian White reiterated a Buy rating on Oracle stock last week and expects the company to meet the revenue expectation of $12.45 billion despite Fiscal Q1 being a seasonally weak quarter.
Thanks to the expected improvement in sales, analysts project Oracle to report earnings of $1.15 a share in Q1 FY24, representing a year-over-year increase of 11.7%. Oracle’s management expects Q1 FY24 adjusted EPS to be between $1.12 and $1.16, reflecting a year-over-year growth of 9% to 13%.
Is Oracle Stock Expected to Rise?
Oracle is expected to benefit from solid AI-led demand and its focus on adding capacity through new cloud regions. However, the stock has gained quite a lot, up over 56% year-to-date, limiting the upside potential ahead of Q1 FY24 earnings.
With 13 Buy and 10 Hold recommendations, Oracle stock has a Moderate Buy consensus rating on TipRanks. Analysts’ average price target of $131.88 implies 4.4% upside potential from current levels.
Options Traders Expect a 5.41% Earnings-Related Move
Options traders are pricing in a +/- 5.41% move after ORCL’s earnings report, which is higher than the previous quarter’s earnings-related move of 0.22% and the average 2.4% move in the last eight quarters. The anticipated earnings move is determined by computing the at-the-money straddle of the options closest to expiration after the earnings announcement.
Learn more about TipRanks’ option tool here.
