Oracle (ORCL) stock has not enjoyed the sort of momentum we have witnessed in other software stocks, which have skyrocketed amid excitement over AI. Over the past three months, Oracle has suffered a 10% decline in its share price, while the S&P 500 index has risen almost 5%. But now might be a good time to buy.

The database and cloud giant will report second quarter fiscal 2024 earnings results after the closing bell Monday. Despite the stock’s slight under-performance, the shares are up close to 40% year-to-date, compared to the 19% rise in the S&P 500 index. There are several reasons for the solid year-to-date returns. The company’s quarterly earnings have shown not only impressive top line growth, but also there has been a noticeable improvement in the Cloud business.

The management’s strategy to shift of Oracle’s products – such as Fusion, NetSuite and OCI – into the cloud has helped filed growth in the past several quarters. Now part of the company’s application portfolio and cloud expansion goals, OCI offers corporations various cloud computing services such as storage, networking, compute and databases. The primary target is enterprise customers who wants to move their mission-critical workloads to the cloud.

Its management has also produced strong cash flow and operating leverage which investors value. What’s more, on the AI front, the company has forged strategic partnerships with two of the prominent leaders in the industry in Microsoft (MSFT) and Nvidia (NVDA). The partnerships underscore the Oracle’s competitive commitment for AI. All of that said, for the stock to keep rising on Monday, the company will need to deliver a top and bottom line beat, along with strong guidance.

In the three months that ended November, Wall Street expects Oracle to earn $1.32 per share on revenue of $13.05 billion. This compares to the year-ago quarter when earnings came to $1.21 per share on revenue of $12.28 billion. For the full year, ending May, earnings are projected to rise 8.4% year over year to $5.55 per share, while full-year revenue of $53.7 billion would rise 7.5% year over year.

Over the last three months, the company has significant changes to its estimates. Earnings per share estimates have been revised upwards six times. Part of the reason has been Oracle’s strong execution, namely the company’s software-as-a-service segment which continues to grow at exceptionally high rates, while its cloud infrastructure and the autonomous database revenues grew at an even faster pace, will remain key growth drivers.

According to analysts at Mizhuo, Oracle is benefiting from what it calls the “lift and shift,” stating Oracle “has $4 billion+ of AI bookings and is well-positioned to benefit over the near term as its GPU Superclusters come online.” At the same time, investment firm Edward Jones noted, “The company’s transition from licensing its products to providing them on a subscription basis in the cloud will drive accelerated sales growth for the company.”

In the first quarter, Oracle cruised by analysts’ revenue and earnings estimates, posting adjusted earnings of $1.19 per share on revenue of $12.45 billion. Analysts were expecting $1.15 per share on revenue of $12.43 billion. Oracle’s cloud revenue came in at $4.6 billion, rising 29% year over year, while the cloud services and license support unit – its biggest – rose 12% year over year to $9.55 billion, offsetting an 11% decline in the cloud license and on-premise license unit.

The company’s infrastructure growth rate continues to accelerate, coming in at north of 50% growth in the quarter. With the stock having taking a slip dip over the past three months, Oracle on Monday can regain its momentum if can continue to demonstrate its cloud leadership potential.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Original: Earnings Feed: Oracle (ORCL) Q2 2024 Earnings: What to Expect