Oracle stock surged late Tuesday after the database software giant gave a bullish outlook for its cloud business. A swelling backlog of work helped investors shrug off earnings and revenue that were short of expectations for its fiscal first quarter.
Oracle said in a news release that remaining performance obligations surged 359% to $455 billion during its August-ended quarter. RPO, measuring contracted revenue that has not yet been recognized, is a closely watched metric for Oracle's backlog as it scales up cloud data centers to serve AI demand.
"We signed four multibillion-dollar contracts with three different customers in Q1," Oracle Chief Executive Safra Catz said in a news release. "This resulted in RPO contract backlog increasing 359% to $455 billion. It was an astonishing quarter — and demand for Oracle Cloud Infrastructure continues to build. Over the next few months, we expect to sign up several additional multibillion-dollar customers and RPO is likely to exceed half-a-trillion dollars."
Oracle has rallied over the past 12 months as optimism grows about AI boosting its cloud infrastructure business, OCI. OCI is a fast-growing challenger to larger rivals Amazon and Microsoft that rent cloud computing services to enterprises.
Oracle announced in July that it will develop 4.5 gigawatts of data center capacity for OpenAI as an expansion of the broader Stargate AI data center initiative.
Catz added in the press release Tuesday that Oracle now expects Oracle Cloud Infrastructure revenue to grow 77% to $18 billion for the current fiscal year, which ends with May 2026.
In after-hours trading on the stock market today, Oracle stock jumped more than 27% to 307.48. That would mark a new all-time high for shares of the tech firm if it holds in regular hours trading Wednesday.
Backlog Commentary Overshadows Oracle Results
As for the August-ended fiscal Q1, Oracle said it earned an adjusted $1.47 per share, up 6% from a year earlier. That's just below the $1.48 per share that analysts polled by FactSet were forecasting. Sales increased 12% to $14.9 billion, compared with analyst estimates of $15.04 billion.
"This quarter is not about the quarter itself, but the significant increase in backlog, which should drive significant model upgrades for the outer years," Barclays analyst Raimo Lenschow wrote to clients Tuesday afternoon, referring to analyst models for Oracle's growth.
Lenschow rates Oracle as overweight, or buy.
Evercore ISI analyst Kirk Materne called Oracle's RPO figure "eye popping" in a client note Tuesday. He rates Oracle stock as outperform, or buy.
Materne added that a question for Oracle will be how the large cloud deals will affect Oracle's capital expenditures plan.
Oracle's capital expenditures in the August-ended quarter were $8.5 billion, compared with $2.3 billion for the same quarter a year earlier.
Oracle Stock: 92 Composite Rating
Prior to earnings, Oracle gained 1.3% in regular-session trading. Not including Tuesday's after-hours gains, shares have rallied 46% year to date and 74.5% in the past 12 months.
Coming into the report, Oracle stock had an IBD Composite Rating of 92 out of a best-possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
Oracle's IBD Relative Strength Rating, meanwhile, was 91 out of 99. The RS Rating means that Oracle has outperformed 91% of all stocks in IBD's database over the past year.
