As Oracle gears up to announce its fiscal Q3 2024 results, the spotlight is on its Oracle Cloud Infrastructure {{ m-tag option="price" ticker="ORCL" currency="USD" }} and its battle against the backdrop of its legacy systems. With OCI's revenue surging by 52% to $1.6 billion in the last quarter and projections indicating a growth of 51% to about $1.8 billion, Oracle's cloud ventures are thriving. The cloud apps business needs to catch up and is expected to see a 20% increase to $3.4 billion. This growth trajectory suggests cloud infrastructure might soon eclipse cloud apps as Oracle's primary cloud business segment.
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The Challenge of Legacy Systems
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However, Oracle's journey has its challenges. The legacy business, primarily on-premise solutions, witnessed a 19% decline, underscoring the shifting focus towards cloud-based services. Despite this, Oracle's strategic moves, including acquiring Cerner and a significant partnership with Microsoft—ordering 20 Oracle cloud data centers within Azure data centers—highlight its aggressive push into the cloud domain.

Oracle's financial health remains robust. Its anticipated revenue of $13.3 billion marks a 7% year-over-year growth, and operating income is expected to grow by 10% to $5.7 billion. Earnings per share (EPS) are projected to increase by 13% to $1.38. These figures reflect Oracle's solid operational performance and strategic positioning within the competitive cloud market.
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Competitive Landscape in the Cloud Market
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The cloud sector's competitive landscape is fierce, with Oracle competing against giants like AWS, Azure, and Google Cloud. Despite trailing behind these competitors, Oracle's operational margins stand out in the 40% to high 40% range, especially compared to peers like Microsoft and Adobe.
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Financial Health and Projections
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Oracle's stock performance has seen fluctuations, with a peak at $127 per share in mid-2023, but it has maintained a steady position, supported by a 7% year-to-date increase. The company's valuation, with an expected EPS growth of 11% over the next three years and trading at an 18x average multiple, suggests a favorable outlook for investors, especially considering the potential for margin expansion as the Cerner acquisition is integrated and normalized.

In conclusion, Oracle's fiscal Q3 2024 preview paints a picture of a company at a critical juncture, balancing its legacy operations with ambitious cloud growth. With strategic acquisitions, partnerships, and a focus on operational efficiency, Oracle is navigating the complexities of the cloud market, aiming to solidify its position and deliver long-term value to its investors.

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