(Reuters) – Oracle shares rose more than 9% in premarket trading on Tuesday as the cloud computing company’s upbeat quarterly results and forecast bolstered investor confidence in its ability to close the gap with the market leaders.
The Texas-based company’s cloud business – seen as a cheaper alternative to leaders Microsoft and Amazon – has seen rapid growth due to the integration of artificial intelligence.
Oracle’s cloud services revenue rose 21% to $5.6 billion in the first quarter. Its total revenue of $13.31 billion beat estimates of $13.23 billion.
“Q1 results were good overall and remain fundamentally positive on some aspects of Oracle’s story, particularly Oracle’s ability to capitalize on AI training-related opportunities,” JP Morgan analysts said in a note.
Oracle shares have risen more than 32% this year, while Microsoft and Amazon have added 8% and 15%, respectively.
Oracle’s cloud infrastructure is also powered by Nvidia hardware, widely considered the gold standard for AI semiconductors.
The company is also partnering with rival cloud service providers to make it easier for its customers to connect their data between providers. On Monday, it announced a tie-up with Amazon Web Services, after signing a similar one with Alphabet’s Google Cloud in June.
“Now with the help of all three bigs (Azure, Google Cloud and now AWS coming together), we will continue to observe a nice increase in cloud revenue as well as growth acceleration thanks to the multi-cloud partnership,” Bernstein analysts said in a note.
Oracle traded at a forward P/E ratio of 21.30, while Microsoft stood at 29.81 and Amazon at 31.59. At least five brokerages have raised their target price since Monday.
(Reporting by Zaheer Kachwala in Bengaluru; Editing by Leroy Leo)