Oracle delivered a powerful counter-narrative to its recent stock slump on Tuesday, posting quarterly results that handily exceeded expectations and raising its long-term revenue outlook. The report, highlighting a 44% surge in cloud revenue, sent shares up sharply in after-hours trading. The software giant reported fiscal third-quarter revenue of $17.19 billion, above analyst forecasts. A standout was cloud infrastructure revenue, which jumped 84% to $4.9 billion, accelerating from the previous quarter's growth rate. The company cited major contracts with entities like Argonne National Laboratory and Lockheed Martin as evidence of momentum. Perhaps more significant for a company whose stock has been under pressure was a substantial boost to its fiscal 2027 revenue guidance, now set at $90 billion—a $1 billion increase. Management also projected strong current-quarter earnings. This performance arrives after a difficult period for Oracle. Its shares have fallen more than 50% from last September's peak, weighed down by concerns over the massive debt funding its artificial intelligence infrastructure expansion. The company reported negative free cash flow of over $13 billion for the past year, a point of investor anxiety. However, Tuesday's numbers suggest demand for AI computing power is translating into real business. Remaining performance obligations—a measure of future revenue—ballooned to $553 billion. Oracle stated that large AI contracts often come with customer prepayments or supplied hardware, limiting the need for additional capital raises. In a nod to AI's operational impact, Oracle noted it is restructuring development teams, using AI code-generation tools to build software "with fewer people." The company recently announced a $110 funding round with backing from Amazon and Nvidia. While challenges of scale and profitability against larger rivals remain, Oracle's latest quarter provides concrete evidence that its costly AI bet is gaining serious traction.

Source: CNBC