Oracle’s (NYSE:ORCL) FQ2 2025 earnings report proves why this company’s stock price rally is far from over. The company has re-emerged as a leading tech innovator. It is central to today’s cloud and the advancement of AI, accelerating its growth as next-gen technology supersedes the legacy business and drives a robust outlook. The reasons Oracle is a leader include its Gen 2 Cloud structure, partnerships with the major hyperscalers, and the world’s fastest data centers, which are the most efficient.
Highlights from Q2 include a 336% increase in GPU consumption aided by the newest data center, the world’s largest supercomputer, which links 65,000 NVIDIA (NASDAQ:NVDA) H200 GPUs into a single unit and a deal with Meta Platforms (NASDAQ:META). Meta will use Oracle’s cloud to train its Llama models, which Oracle will use to enhance its AI capabilities.
Oracle’s Price Plunge: A Buy-the-Dip Opportunity (SO:FTCE11B) That Won’t Last Long
Oracle’s stock price plunged following the Q2 release, opening a textbook buy-the-dip opportunity. The company missed on the top and bottom lines, but the miss was slim. The analysts had set a high bar. The company produced growth, which is accelerating, and the long-term outlook is robust with record-level AI demand.
The company’s $14.1 billion in net revenue is up 9.0%, missing MarketBeat’s reported consensus by a mere 14 basis points, with strength centered in the cloud and infrastructure segments. Infrastructure, notably, grew by 52% to outpace industry peers. Oracle is still a tiny hyperscaler but the fastest growing as AI developers flock to it. It is gaining share in the world dominated by Alphabet (NASDAQ:GOOGL), Amazon/AWS (NASDAQ:AMZN), and Microsoft (NASDAQ:MSFT).
Margin news is also solid. The company was able to widen its margin and drive leverage bottom-line growth. The adjusted operating income grew by 10% and the net income by 12%, leading to a positive cash flow quarter despite heavy investment in expansion and new technology.
Balance sheet highlights include increased cash, receivables, current, and total assets, only partially offset by increased liability. The net result is that equity is up nearly 55% year to date and is expected to continue rising in Q4 and 2025. Regarding debt, Oracle continues to carry moderately elevated debt levels but is in an increasingly strong position and may address that issue over the coming quarters. As it is, long-term debt is about 5.6x equity and 10x cash.
Guidance is another reason to buy this stock while it is down. The company reports a robust pipeline growing faster than revenue. Evidence of that is seen in the RPO, which is up 50% on an FX-neutral basis and led by an 80% increase in infrastructure. The company expects Q4 revenue to grow by roughly 10% and EPS by 9%, which is mixed relative to the analyst consensus forecast but favorable to investors with EPS above the target. Given the trends, both are likely to be cautious.
Analysts Lift Price Targets for Oracle, See 10% Upside From Critical Support
The analysts' response is bullish, with more than one dozen revisions tracked by MarketBeat, including an increase in the price target. The consensus of fresh targets is a move to $197, with nine or nearly 70% of them at or above $200. The high-end range puts the stock at $220, another 10% upside from the consensus figure, and it will likely be increased over the coming quarters.
The price action in Oracle is sketchy following the release, but the market was up 85% YTD ahead of the report and needed a correction. The premarket action is near a critical level, near $175, so the sell-off may not go very deep. The market could begin to rebound quickly in that scenario and move up to set a fresh all-time high in early 2025. If not, this market could fall to $160 or lower.