Oracle Earnings: Cloud Demand Coming Along Nicely As Capacity Expansion Continues

Narrow-moat Oracle’s third-quarter results fell short of our aggressive estimates on the top and bottom lines, but were more in line with broader investor expectations. Shares are surging after hours, likely based on the strong growth in both cloud revenue and remaining performance obligations, in our view. Despite the recent stock performance, we maintain our fair value estimate of $84 per share and see shares as overvalued. The firm is progressing well on initiatives in both Cerner and Oracle Cloud Infrastructure, or OCI, which is in line with what we anticipated for the quarter, as well as with our longer-term growth and margin cadence.