AI and Earnings Expansion Support Oracle's Valuation

Oracle (NYSE:ORCL) has been leveraging artificial intelligence (AI) to drive earnings growth and expansion, with a strong track record of beating earnings estimates. The company's AI strategy has enabled it to improve employee productivity, automate end-to-end processes, and reduce the cost of doing business. Oracle's AI approach has also helped it maintain a significant market share in the AI landscape, with strong demand for its AI services.

Oracle's AI strategy is centered around embedding AI and machine learning (ML) across its entire product suite, spanning databases, AI infrastructure, cloud services, applications, and industry solutions. The company has continued to invest in maintaining data security and governance while building an AI infrastructure used by the builders of the world's biggest and most capable large language models (LLMs).

Oracle has announced several enhancements to its AI offerings, including:

1. Cohere Command R and Command R+ Models: Oracle has partnered with Cohere to offer the Command R and Command R+ models on the OCI Generative AI service. These models are highly scalable and secure, offering industry-leading multilingual capabilities and leveraging retrieval-augmented generation (RAG) for business use cases with high accuracy and verifiability.
2. Meta Llama3-70B Model: Oracle now supports the pretrained Meta Llama 3 70B model, which offers improved reasoning, code generation, and instruction capabilities compared to the previous Llama 2 model. Users can access this model through on-demand or dedicated hosting and fine-tune it with their own custom data set using the low-rank adaptation (LoRA) fine-tuning method.
3. LlamaIndex: Oracle has integrated LlamaIndex, a leading framework for building LLM applications, with the OCI Generative AI service. This integration makes it simpler to create chatbots, agents, and other applications using generative AI.
4. New Chat API: Oracle introduced a new Chat API that supports the Command R and Llama 3 models, accessible via the OCI SDK, API, or console Playground. This API provides an easy integration into the new models by matching the format of the partner model APIs and supporting tool use for function calling or building complex agents.

Oracle's AI strategy has contributed to its earnings growth and expansion by improving employee productivity, automating end-to-end processes, and reducing the cost of doing business. The company's AI services are used by a wide range of industries, including finance, healthcare, and retail. Oracle's cloud services revenue grew by 25% in USD and 24% in constant currency in the second quarter of fiscal 2024, indicating strong demand for the company's AI offerings.



Oracle's AI approach has been successful in driving earnings growth and increasing market share. According to the provided data, Oracle's earnings per share (EPS) have grown at a CAGR of 10.38% over the past 5 years, which is higher than the industry median of 2.53%. Additionally, Oracle's total return on investment (ROI) has been consistently higher than the industry median over the past 5 years, with a CAGR of 18.19% compared to the industry median of 14.03%.



In conclusion, Oracle's AI strategy has been instrumental in driving earnings growth and expansion. By embedding AI across its entire technology stack, Oracle has been able to provide immediate business value to its customers and drive high-value business outcomes. The company's strong financial performance and growing demand for its AI services indicate that Oracle's AI approach is well-positioned to continue supporting its valuation in the future.