Oracle is thriving in the cloud. Artificial intelligence is next.

To the casual observer, Oracle’s emergence as a serious player in cloud computing may have come out of nowhere. But Barron readers shouldn’t be surprised.

In early 2021, I wrote a cover story titled Oracle is turning into a cloud giant. At the time, Oracle (ticker: ORCL) was pushing cloud-based versions of its database software and business application portfolio. Oracle was also aggressively building a cloud computing business to take on the three cloud giants Amazon


and Alphabet

There was considerable investor doubt about Oracle’s chances of success. But the company believed it.

For that story, Clay Magouyrk, executive vice president of Oracle Cloud, told me: There’s no way Oracle will be seen as anything other than a cloud company in the next two or three years.

Turns out it was a big call from Clay. Oracle stock is up about 110% since our history. Last fall, when the stock was down to about $60 from a peak near $100, we wrote that the market had a second chance to buy the evolving cloud game on the cheap. The stock closed at $126.55 on Thursday. Sure enough, Oracle’s story now is all about the cloud.

The one wrinkle that Magouyrk hadn’t foreseen was the rapid emergence of generative AI as a major driver for nearly every technology company, and especially cloud computing vendors. New market enthusiasm for Oracle has propelled the 47-year-old company into the spotlight for the first time in many years, driving Oracle’s stock price to record highs. It made founder Larry Ellison the third richest human in the world, behind his friend Elon Musk and LVMH CEO Bernard Arnault.

Advertising – Scroll to continue

On Monday, Oracle added fuel to the fire by posting better-than-expected financial results for the quarter and fiscal year ending in May. During the fourth quarter, Oracle’s cloud applications business increased 45% from a year ago. Its cloud infrastructure business increased 76%, accelerating from 55% growth in the prior quarter.

The day after the earnings, Oracle announced that it would add generative AI capabilities to its business software lineup in the coming weeks. And it unveiled a new partnership with major language modeling start-up Cohere.

The torrent of optimistic news is forcing stock skeptics to reconsider. Meanwhile, the bulls are raising their price targets to a level that would have seemed ridiculous just a few months ago. Following Oracle’s earnings report last week, analyst Mizuho Siti Panigrahi and Guggenheim’s John DiFucci both raised their targets to $150, about 20% higher than recent levels. As long as the company’s cloud business continues to gain market share from larger rivals, the stock could soar even higher.

Advertising – Scroll to continue

Last week, I caught up with Magouyrk to discuss his updated view on Oracle’s cloud and AI business. She is bullish as always.

Magouyrk sees Oracle’s AI strategy in three layers. At the bottom of the whole stack, he says, Generative AI needs large-scale infrastructure for training and inference, driving demand for Oracle’s cloud capabilities. He helps the company have a strong relationship with Nvidia (NVDA), enabling the company to offer customers AI arrays of thousands of GPUs to train new models.

A second tier, he says, combines broad language models with expertise in specific vertical markets and a large client base. This is where Cohere comes in. They are amazing at building these great language models; they were quite good at corporate relationships, security and privacy of your data, as well as building a good infrastructure, says Magouyrk.

Advertising – Scroll to continue

The third part is applications. Oracle last week said it plans to use generative AI to expand the reach of its enterprise software. Think about generating job offers from [HR software], automatic archiving of police reports based on body cam interactions for first responders or automation and summary of patient discharge notes in healthcare applications. There are a myriad of uses.

Magouyrk says that initially most opportunities are at the bottom of the pyramid, helping companies train their AI models. But in 15 years it will be an inverted pyramid, he says. The opportunity will be to incorporate this technology into applications.

Of course, Oracle has no plans to give away any of those things.

Advertising – Scroll to continue

Magouyrk says AI-enabled versions of Oracle’s flagship apps are coming soon. We’re talking months, not years. There is a lot of demand and a lot of value in that demand.

As for the accelerating overall growth of Oracle’s cloud business, Magouyrk, who once worked as a senior engineer at Amazon Web Services, says it comes as no surprise to him.

Cloud infrastructure is a very large space, and growing your business takes time, he adds. More people are taking this seriously than two years ago. We had all the ingredients but one: we had the sales force, we had the capability to serve customers in 150 countries, we had the capital to expand the business, we had the technology. What we needed to do was prove it worked, build benchmarks, and build momentum. Now that it’s happening, we’re accelerating.

Email Eric J. Savitz at

#Oracle #thriving #cloud #Artificial #intelligence

Leave a Comment