Oracle hits record after 50% surge in 2023, defying tech struggles
Larry Ellison, Oracle’s chairman and technology chief, speaks at the Oracle OpenWorld conference in San Francisco on September 16, 2019.
Justin Sullivan | Getty Images
Oracle is having a moment.
For years, the database software developer lagged behind tech rivals in building cloud technology that met the demands of the modern-day enterprise. But that’s changing, and Wall Street is quite pleased with what it sees from Larry Ellison’s 46-year-old company.
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Oracle shares climbed 4.8% on Wednesday to $122.24, closing at a record for a fifth straight day and the eighth time this month. The stock is up 73% over the past 12 months, outperforming all large-cap enterprise tech stocks over that stretch other than Nvidia. The shares are up over 50% in 2023, which would mark the best year for shareholders since the dot-com boom of 1999.
The company got its latest boost this week after reporting stronger-than-expected earnings and revenue, prompting nods of approval from analysts. Goldman Sachs upgraded its rating on the stock to the equivalent of hold from sell.
Within hours of the earnings report, Bloomberg declared that Ellison had reached the No. 4 spot on its ranking of billionaires, his highest spot to date. He surpassed Microsoft co-founder Bill Gates.
“Let’s give him credit where it’s finally due,” said Eric Lynch, managing director of Scharf Investments, which held $163 million worth of Oracle shares at the end of the first quarter, according to regulatory filings. “The upside case is finally coming through.”
The story that’s exciting investors these days? No surprise. It’s about artificial intelligence.
Prior to the latest rally, Oracle was largely viewed as a technology has-been rather than as an innovator. In the red-hot cloud market, it had lost market share to Salesforce in selling software to sales reps, and was a bit player in infrastructure as a service (IaaS), where Amazon, Microsoft and Google were leading the way. Oracle picked up significant business from TikTok and Zoom, but big names were mostly going elsewhere.
Now, Oracle is seeing accelerated growth thanks to the craze around generative AI, the technology that can craft images or text from a few words of human input. The company is a significant investor in Cohere, an enterprise-focused generative AI startup whose technology can power copywriting, search and summarization.
Cohere is valued at over $2 billion and ranked No. 44 on CNBC’s 2023 Disruptor 50 List.
On the earnings call, Ellison told analysts that customers have “recently signed contracts to purchase more than $2 billion of capacity” on what Oracle calls its Gen 2 Cloud.
After its market cap fell below that of the younger Salesforce in 2020, Oracle reclaimed the lead over its longtime rival the following year, and now it’s not even close. Oracle is worth $330 billion as of Wednesday’s close, while Salesforce’s market cap sits at $204 billion.
Oracle is even growing faster, with revenue in the latest quarter increasing 17% from the prior year, compared to 11% growth at Salesforce.
Cloud infrastructure revenue at Oracle surged 76% from a year earlier, surpassing growth of 55% the prior quarter. That’s one data point that analyst Kash Rangan and his Goldman Sachs colleagues highlighted in their upgrade.
The analysts said the acceleration is “a clear signal that Oracle’s advertised price/performance advantage vs. the hyperscalers is resonating with the market (both net new and existing customers), which should position the company for durable share gains despite its late entry into IaaS.”
Even with the cloud infrastructure growth, Oracle management called for no change to capital expenditures in the new 2024 fiscal year, which bodes well for free cash flow generation, the Goldman analysts said.
Like several enterprise-focused technology companies, Oracle started selling cloud-based versions of applications that clients had previously run in their on-premises data centers. The company expanded its reach with the $9.1 billion acquisition of NetSuite in 2016.
Rebuilding the guts of the data center was less straightforward, and Oracle quickly fell behind. In 2009, Ellison dismissed the rise of cloud-computing branding.
“Our industry is so bizarre,” he said. “You know, they just change a term, and they think they’ve invented technology.”
Ellison made a bad bet. Between 2010 and the end of 2020, not only did Oracle’s stock badly underperform Amazon, Microsoft and Google, but just buying an S&P 500 tracking index would have returned almost double what an investor would’ve have made on Oracle.
Oracle eventually came around to charging organizations for servers, storage and networking services based on how much they used, following in the path of the market leaders.
The company introduced the Elastic Compute Cloud in 2015, nine years after the launch of Amazon Web Services’ foundational EC2 computing service. Then, in 2018, Oracle debuted its Gen 2 cloud portfolio.
In October Ellison said he thought Oracle had been copying rivals, so he canceled the existing cloud effort and pushed for a new approach. As organizations look for ways to reduce IT spending, Ellison on Monday told analysts that Oracle’s cloud database can be faster and cheaper than what’s available from AWS.
Lynch, whose Los Gatos, California-based investment firm took a stake in Oracle in 2011, recalled that people used to poke fun of Ellison for his earnings call routine of reciting the names of small-time operations that had signed up for Oracle’s cloud services. The company was still appealing to value-oriented investors because it had a strong balance sheet due to a huge roster of legacy clients, and boasted stronger profit margins than many of its peers.
Now Ellison can reel off big brands using his company’s cloud. Oracle called out Dollar Tree, Exxon Mobil, and Pfizer as cloud customers during its fiscal fourth quarter.
Lynch acknowledged that Oracle appears to be enjoying its position within the AI gold rush and said he doesn’t expect such high growth in cloud infrastructure to persist.
For the time being, Ellison can enjoy his company’s bragging rights in Silicon Valley at a time when so many high-profile and once high-flying neighbors are downsizing for the first time in their history. Oracle has had some layoffs but a smaller number.
On Oracle’s earnings call this week, CEO Safra Catz took a minute to express gratitude to the company’s customers and employees.
“Some of you are new, and many of you have been with us for years, in fact, even decades, and I think you all see that our best days are in fact ahead of us,” she said. Catz then thanked Ellison “for leading with brilliance, determination and vision and allowing us to all be part of this incredible journey, which is just getting started.”
WATCH: Oracle ‘multiple years late’ in A.I. race despite post-earnings surge, says Jefferies’ Brent Thill
Chegg seen at the New York Stock Exchange on Feb. 13, 2025.
Danielle DeVries | CNBC
Chegg on Monday filed suit in federal district court against Google, claiming that artificial intelligence summaries of search results have hurt the online education company’s traffic and revenue.
The legal move come nearly two years after former CEO Dan Rosensweig said students engaging with OpenAI’s ChatGPT assistant were cutting into Chegg’s new customer growth.
Chegg is worth less than $200 million, and in after-hours trading Monday, the stock was trading just above $1 per share. Chegg has engaged Goldman Sachs and will look at strategic options, including getting acquired and going private, President and CEO Nathan Schultz told analysts on a Monday earnings call.
Chegg reported a $6.1 million net loss on $143.5 million in fourth-quarter revenue, a 24% decline year over year, according to a statement. Analysts polled by LSEG had expected $142.1 million in revenue. Management called for first-quarter revenue between $114 million and $116 million, but analysts had been targeting $138.1 million. The stock was down 23% in extended trading.
Google forces companies like Chegg to “supply our proprietary content in order to be included in Google’s search function,” said Schultz, adding that the search company uses its monopoly power, “reaping the financial benefits of Chegg’s content without having to spend a dime.”
Despite the suit, Chegg has its own AI strategy. It has drawn on Meta’s open-source Llama, as well as models from privately held Anthropic and Mistral, Schultz said. Chegg has also partnered with OpenAI, which the education company views as a competitor, alongside Google. The company reported that 3.6 million students had subscriptions in the fourth quarter, down 21%. Subscriptions include access to AI-powered learning assistance. Chegg also rents and sells textbooks.
AI Overviews, as Google’s artificial intelligence summaries are called, are available in the company’s search engine in over 100 countries, with more than 1 billion users, the company said in October. They show up above links to other pages in search results.
A Google spokesperson told CNBC that the company will defend itself against Chegg’s suit.
“Every day, Google sends billions of clicks to sites across the web, and AI Overviews send traffic to a greater diversity of sites,” the Google spokesperson said.
Chegg claimed that Google drew on Chegg’s collection of 135 million questions and answers on a variety of subjects in its model training data sets.
After training its models, Google can generate content that competes with information that publishers have on offer in search results, Chegg argued in its complaint. The online learning company included a screenshot of a Google AI Overview that borrows details from Chegg’s website but does not attribute the information. However, the relevant Chegg page does show up lower down in search results.
Chegg cited a federal judge’s ruling last August that Google holds a monopoly in the search market. The decision came after the Department of Justice in 2020 filed its landmark case, alleging that Google controlled the general search market by creating strong barriers to entry and a feedback loop that sustained its dominance.
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