Oracle Cloud Steps Into the Spotlight to Drive Growth and Reinforce Moat

Oracle has long been a leader in both relational database and enterprise resource planning, or ERP, software. However, a plethora of new database application competitors, the build out of Oracle Cloud Infrastructure, or OCI, and the shift to the cloud for software more broadly had served as various thorns in the side of the company. While we do not believe Oracle is out of the woods on all fronts, we think it has made substantial progress on all fronts. Customer retention remains high as customers are shifting to the cloud within Oracle’s Fusion apps and through OCI. As a result, growth and margin pressure have both eased and have even reversed. These factors dovetail in our view that the company will generate excess returns for the next decade, which informs our narrow moat rating.