Exploring Superior Cloud and Artificial Intelligence Shares: Oracle versus Amazon
Investment Diversity: Oracle vs. Amazon in the Cloud and AI Landscape
Oracle and Amazon, two behemoths in their respective spheres, offer distinct investment opportunities in the burgeoning cloud and artificial intelligence (AI) services market.
Oracle, renowned for its database software dominance, has transmuted many of its on-premise applications into cloud-based services over the past decade. It has also developed its public cloud infrastructure platform to provide cutting-edge remote storage and computing power for enterprise customers. Amazon, the undisputed king of e-commerce, holds the position of the largest cloud infrastructure platform through its subsidiary, Amazon Web Services (AWS).
Since 2021, Oracle's stock has surged more than double, with Amazon's stock seeing a 40% increase during the same period. Let's examine why Oracle outperformed Amazon, whetting our understanding of which could be a better investment option now.
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Oracle: Steady Growth Amidst Competition
In fiscal 2024, Oracle generated approximately one-third of its revenues (excluding the acquisition of Cerner Healthcare IT in 2022) from its cloud-based services. This pivotal segment, featuring cloud-based database services, enterprise resource planning (ERP) services, and Oracle Cloud Infrastructure (OCI) offerings, reported a 26% revenue growth for the full year, albeit a slight deceleration from its 29% growth in fiscal 2023 (excluding Cerner).
Despite relying on slower-growth businesses, Oracle's total revenue also increased by 6% for the year, reflecting the balance between the expansion of cloud-based services and its on-premise and cloud licensing business.
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Forecasts for the period from fiscal 2024 to fiscal 2027 suggest a compound annual growth rate (CAGR) of 12% for Oracle's revenue and 20% for earnings per share (EPS). This projection should chiefly derive from the expansion of OCI, which now offers devoted tools for hosting generative AI applications, and its escalating cloud and AI ecosystems with potential acquisitions.
However, investors need to remain vigilant as Oracle is still a minor contender in the cloud platform competition when compared to industry leaders such as AWS and Microsoft Azure. Both public cloud giants are expanding driving integrated database services to challenge legacy market leaders like Oracle.
Amazon: Revitalized Profit Pillars
Amazon relies primarily on its e-commerce marketplaces for revenue generation, but AWS boasts the highest profit margin. AWS accounted for 58% of Amazon's operating profit in 2024, even with a smaller revenue share of only 17%.
Driven by the AI market, AWS reported a 19% revenue growth for the entire year. AWS's expansion was further fueled by rolling out custom application programming interfaces (APIs) like Bedrock, useful for designing tailored chatbots and generative AI tools.
Amazon follows a unique business model, leveraging AWS's robust earnings to sustain its e-commerce growth. By subsidizing its loss-leading e-commerce ventures using AWS's profits, Amazon continues to expand its digital marketplace while harnessing profits from AWS to fund its technological progress.
cloud-based services, but its total revenue still rose 6% for the full year.
Analysts anticipate Amazon’s revenue and EPS to grow at a CAGR of 10% and 20%, respectively, from 2024 to 2027. This predictable growth may be influenced by the enhancement of the macroeconomic climate and the accelerating AI market.
Which Stock Holds the Upper Hand?
Oracle's cloud-powered surge during turbulent market conditions has positioned it favorably against Amazon, whose e-commerce business struggled under the aegis of the same macroeconomic headwinds.
generative AI applications, and its own cloud-based services. It will also likely continue to expand cloud and AI ecosystems with more acquisitions.
However, with interest rates decreasing and the overall market stabilizing, Amazon has the potential to regain investor favor as its e-commerce and cloud ventures resume their growth trajectory.
Both stocks present enticing long-term plays on the market's expanding cloud and AI trends. Oracle seems to offer a balanced play on these trends with less aggressive forward multiples compared to Amazon.
A cautious investor's best course is to evaluate the industry trends, competitors, and individual company strengths to make an informed decision.
- To further explore investment opportunities in Oracle, you can visit their stock page at this href.
- Oracle's cloud-based services subsidize its slower-growth businesses, allowing for a total revenue increase of 6% in fiscal 2024.
- Oracle's chatbot offerings have been bolstered through the use of dedicated tools for hosting generative AI applications on Oracle Cloud Infrastructure (OCI).
- Amazon's subsidiary, Amazon Web Services (AWS), has partnered with developers to create custom chatbot APIs like Bedrock, leveraging their AI capabilities.