Deeper dive: why Oracle's earnings weren't so bad

Wolfe Research analyst Alex Zukin recommends loading up on Oracle Corp (NYSE: ORCL) on the post-earnings weakness as it’s effectively the fourth hyperscaler for new AI workloads.

Oracle came in slightly below Street estimates for its fiscal second quarter last night.

But the investment firm still finds its shares worth on the sell-off owning as it’s well-positioned to help companies interested in “making transitions to the cloud for the first time.”

Despite today’s price action, Oracle stock is up 75% versus the start of 2025.

Oracle stock is poised to benefit from AI tailwinds

Wolfe Research has confidence in Oracle’s ability to accelerate growth as it has immense “experience in commercial engagements and a wide breadth of products and solutions”.

The company is fairly positioned to capitalise on AI tailwinds since it has the chips and the right architecture as well, analyst Alex Zukin argued in an interview with Yahoo Finance on Monday.

Oracle has a deal in place with Nvidia and Larry Ellison – its cofounder and chief technology officer is friends with Elon Musk who’s slated to be an advisor to President-elect Donald Trump.

This shows “how well connected they are” both in the US as well as globally, Zukin added.

Oracle stock currently pays a dividend yield of 0.84% that makes up for another good reason to have it in your portfolio.

RPO weakness not a big deal for ORCL

Oracle reported a sequential decline in its remaining performance obligations (RPO) from $99 billion to $97 billion on Monday.

RPO is a forward-looking indicator that offers insight into contracts a company is yet to deliver and recognise as revenue.  

But Wolfe Research analyst Alex Zukin shrugged that weakness off as well, saying “that number has been going up pretty unbelievably … it ticked up by $30 billion between Q2 of last year and Q4 of last year.”

On a year-over-year basis, Oracle’s remaining performance obligations were still up 50% in constant currency. Note that ORCL shares have more than tripled since their pandemic low.

Oracle’s cloud infrastructure growth beats hyperscale rivals

Alex Zukin remains bullish on Oracle stock as its Cloud Infrastructure revenue came in up 52% for the second quarter, indicating solid AI demand that CEO Safra Catz also touted in a press release on Monday.

The growth rate topped “any of our hyperscale cloud infrastructure competitors,” she added.

Oracle already has cloud partnerships with Amazon, Microsoft, Google, and Meta Platforms. Such strategic alliances could enable ORCL stock to run further to the upside in 2025, as per Zukin.

All in all, “they just have to keep doing what they’re doing and the stock will continue to work,” he concluded. Wolf Research currently has a $205 price target on Oracle shares that translates to a more than 15% upside from here.

Our analyst Crispus Nyaga talked of a potential retreat in Oracle stock before it resumes its bull run in October.