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Oracle (ORCL) to Invest More Than $8B in Cloud Computing & AI

Oracle ORCL has announced its intention to invest more than $8 billion over the next decade to meet the growing demand for cloud computing and artificial intelligence (AI) infrastructure in Japan. This investment aims to expand the presence of Oracle Cloud Infrastructure (“OCI”) throughout Japan. Additionally, the company plans to grow its operations and support engineering teams in Japan to assist customers and partners with digital sovereignty requirements.

To address the needs of customers and partners in Japan, ORCL will enhance local customer support for its public cloud regions in Tokyo and Osaka. It will also expand its local operations teams for services like Oracle Alloy and OCI Dedicated Region. These efforts aim to facilitate the transition of critical workloads to OCI, allowing the Japanese government and businesses to adopt sovereign AI solutions securely.

The company's sovereign cloud and AI services will be available within Japan's borders or on-premises for organizations, offering various operational controls for security. Oracle distinguishes itself as the sole hyperscaler capable of delivering AI and a comprehensive suite of more than 100 cloud services locally and anywhere.

Shares of this Zacks Rank #3 (Hold) company have gained 12.6% year to date compared with the Zacks Computer and Technology sector’s growth of 6.1%. This outperformance was due to ORCL’s alignment in understanding customer needs. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Oracle Corporation Price and Consensus

Oracle Corporation Price and Consensus
Oracle Corporation Price and Consensus

Oracle Corporation price-consensus-chart | Oracle Corporation Quote

ORCL Faces Competition in Japan’s Cloud Computing Market

According to a report by Techanivo, the cloud computing market in Japan is projected to reach $30.24 billion in 2027, witnessing a CAGR of 12.54% between 2022 and 2027.

The Japanese cloud computing market is expanding because small and medium-sized businesses are increasingly using cloud services. Cloud computing is a popular trend now, and both small and big companies want to cut down on their spending by using new technologies. This allows businesses to adjust their computing resources to meet the changing needs without having to invest in additional hardware or software.

Oracle faces tough competition in Japan’s cloud computing market from players like Microsoft MSFT, Amazon AMZN and Alphabet GOOGL.

Microsoft Cloud offers various technology tools and solutions to help businesses adapt to the evolving landscape. It recently declared its intention to invest $2.9 billion in the next couple of years to enhance its large-scale cloud computing and AI infrastructure in Japan. Additionally, the company plans to broaden its digital training initiatives, aiming to provide AI skills training to more than three million individuals in the next three years. MSFT will establish its first research lab in Japan under Microsoft Research Asia and strengthen its collaboration with the Japanese government on cybersecurity.

AMZN’s cloud division, Amazon Web Services (“AWS”), provides cloud services to government entities, with more than 7,500 agencies using its platform. In January 2024, AWS announced plans to invest 2.26 trillion yen ($15.24 billion) in Japan by 2027 to expand its cloud computing infrastructure, which supports AI services. AWS is increasing its facilities in Tokyo and Osaka to meet the rising demand from customers.

Alphabet-owned Google Cloud provides a collection of flexible cloud services like computing, storing and analyzing data, as well as using machine learning. In 2023, GOOGL set up its first data center in Japan, close to Tokyo, to support its services better. The company also initiated a project to lay a cable under the sea connecting Canada and Japan. Moreover, it operates cloud regions in Tokyo and Osaka, offering services for storing data and managing AI infrastructure.

ORCL recently partnered with Fujitsu Limited to provide cloud and AI services that meet the digital sovereignty needs of the Japanese government and businesses. Through Oracle Alloy, Fujitsu will enhance its Hybrid IT services for Fujitsu Uvance, assisting customers in business growth and addressing societal challenges. This is expected to aid the company’s Asia-Pacific revenues in the upcoming quarters.

The Zacks Consensus Estimate for ORCL’s fiscal 2024 Asia-Pacific revenues is pegged at $6.87 billion, indicating year-over-year growth of 3.8%. The Zacks Consensus Estimate for earnings is pegged at $5.58 per share, indicating year-over-year growth of 8.98%.

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