Oracle Stock Hits New High on Defense Cloud Contract Speculation

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Oracle

stocks are on a tear – up 8% this week, 13% in the last six trading days and 37% for the year to date.

And on Friday, it was pretty much the same: Shares of Oracle (ticker: ORCL) jumped 2.5%, to $ 87.76, a new closing high. For the first time, the enterprise software company is approaching a market cap of $ 250 billion.

For the rally, give partial credit to the Pentagon.

The Defense Department on Tuesday canceled its 10-year, $ 10 billion JEDI cloud computing contract with

Microsoft

(MSFT), that Oracle and

Amazon.com

(AMZN) had contested relentlessly in court. And the DoD is launching a new replacement project that Oracle may be able to bid on.

Oracle is moving an increasing portion of its database and application business to the cloud as Barron reported in February. This change paved the way for a re-acceleration of revenue growth. A few weeks ago, Oracle released financial results for the May quarter which showed revenue growth of 8%, the largest increase in a decade.

Its Oracle Cloud infrastructure grew by more than 100% during the May quarter. In addition, the company has had successes including video conferencing companies

Zoom video

(ZM) and

8 × 8

(EGH).

Yet Oracle Cloud lags far behind Amazon Web Services, Microsoft Azure, and Google Cloud, the giants of the growing public cloud services market. But being a Pentagon player would change that.

The Department of Defense’s new project, called Joint Warfighter Cloud Capability, will be what the agency describes as a “multi-cloud / multi-vendor” contract. The government said it would seek proposals from “a limited number of sources,” noting that only Microsoft and Amazon appear to meet the department’s demands.

But – and that’s a big but – the department also said it would “immediately engage with the industry” and continue research to determine if other US-based cloud players can respond to the needs as well. requirements. “If so, the ministry will also negotiate with these companies,” the agency said.

And therein lies a silver lining for Oracle, which has claimed for years that its own cloud meets the technical requirements of the government. CEO Safra Catz recently told reporters in Israel that she spoke to Pentagon IT staff after Tuesday’s announcement and that “there was a willingness to reconsider the matter.”

While a partial victory for Oracle on the new contract doesn’t really shake things up in terms of revenue growth, it would certainly be a huge statement of the company’s ability to compete with AWS and Azure. And while that hasn’t happened yet – it’s not even clear that Oracle really meets all DoD requirements for the job – investors seem intrigued.

Write to Eric J. Savitz at [email protected]