Oracle Corporation has raised its sales outlook, driving its stock higher in after-hours trading, as demand for artificial intelligence continues to exceed available supply.
The company stated that businesses are showing growing demand for cloud computing resources used to train and operate AI systems. At the same time, the Austin, Texas-based firm is utilizing AI internally to replace some of its workforce.
"Demand for AI and high-end computing power will continue to expand broadly across the economy," co-CEO Clay Magouyrk said during an analyst conference call on Tuesday.
The company's shares rose 10% in pre-market trading on Wednesday.
Given these trends, Oracle anticipates revenue growth for fiscal year 2027 and beyond will meet or potentially exceed expectations. The company now expects fiscal 2027 revenue to reach $90 billion, surpassing the analyst consensus of $86.61 billion. It reaffirmed its performance guidance for fiscal 2026.
For the current fourth quarter, Oracle forecasts revenue growth of 18% to 20%, with adjusted earnings per share between $1.92 and $1.96. Wall Street had expected adjusted earnings per share of $1.93.
Investors had previously questioned whether Oracle could achieve its ambitious AI targets. Before Tuesday's close, the stock had fallen nearly one-third over the past three months, partly due to shareholder concerns about the viability of its long-term financing plans.
Clay Magouyrk noted that Oracle's remaining performance obligation at the end of the third quarter stood at $553 billion, an increase of more than four times year-over-year. This surge reflects that demand for AI infrastructure, including GPUs and CPUs, is outstripping supply.
Company revenue grew 18% to $17.19 billion, exceeding the $16.92 billion forecast by analysts surveyed by FactSet. Cloud revenue increased 41%, with cloud infrastructure sales surging 81%. Software sales, on a constant currency basis, declined by 1%.
Oracle indicated that some of its largest AI cloud computing customers have recently strengthened their financial positions, further boosting demand.
Oracle reported a third-quarter profit of $3.72 billion, or $1.27 per share, compared to a profit of $2.94 billion, or $1.02 per share, in the same period last year. Excluding certain one-time items, adjusted earnings per share were $1.79, beating the analyst estimate of $1.70 from FactSet.
The company stated that shortly after announcing plans in February to raise up to $50 billion through debt and equity financing, it had already secured $30 billion.
Co-CEO Mike Sicilia said Oracle is internally adopting AI programming tools to help its software-as-a-service business operate more efficiently. The company is using AI to develop new SaaS products and embed intelligent agents into existing applications.
This shift has reduced the manpower required for software development and improved efficiency, leading Oracle to downsize its product development teams. The company recorded $153 million in restructuring charges this quarter, which included severance payments.
During the call, Mike Sicilia also addressed market concerns that AI could disrupt SaaS companies, which represent a significant portion of Oracle's total business. Software stocks experienced a broad decline in February as investors worried that AI might make SaaS firms obsolete.
"Some smaller or single-product SaaS vendors are likely to be impacted," Mike Sicilia said, "but Oracle will not be one of them."