Oracle shares surge after Q3 results beat estimates

Investing.com -- Oracle shares surged in early U.S. trading on Tuesday after clocking stronger-than-expected quarterly earnings thanks to increased demand for its AI offerings.

Profit per-share excluding items jumped by 16% in its fiscal third quarter to $1.41, topping Bloomberg consensus estimates of $1.38.

Remaining performance obligations, a gauge of booked revenue, climbed by 29% to more than $80 billion -- a performance that analysts described as "stellar" and "very strong."

"[T]he positive demand commentary and strong bookings growth undergird the structural shift at Oracle that positions the company well for a sustained acceleration in topline growth," said analysts at William Blair said in a note upgrading their rating of the stock to "Outperform."

In a statement, Chief Executive Safra Catz said the firm expects to "continue receiving large contracts reserving cloud infrastructure capacity because the demand for our Gen2 AI infrastructure substantially exceeds supply -- despite the fact we are opening new and expanding existing cloud datacenters very, very rapidly."

Cloud capacity seems to be catching up with the rollout of new data centers, analysts at BMO Capital Markets said, adding that they now expect revenue growth to be solid throughout Oracle's (NYSE:ORCL) upcoming 2025 financial year. 

Analysts at JPMorgan also argued that this bullish view "underwrite[s] the logic that backlog must convert to revenue over time." Oracle now expects revenue growth to be in the range of 4% to 6% in its current quarter.

Meanwhile, the company revealed that it will make a joint announcement with Nvidia (NASDAQ:NVDA) this week and mentioned the AI darling multiple times in a post-results call with analysts. Nvidia makes AI-optimized chips that Oracle's cloud service customers can use.

Gains in Oracle spilled over into other tech heavyweights, given that AI hype has been a key driver of stock gains in recent months. Nvidia rose 1.8%, while Microsoft (NASDAQ:MSFT) and Alphabet Inc (NASDAQ:GOOGL) edged up by 1.1% and 0.4%, respectively. 

Yasin Ebrahim contributed to this report.