Better Cloud and AI Stock: Oracle vs. Amazon

Core Viewpoint - The article compares investment opportunities in Oracle and Amazon, two major players in the cloud and AI services markets, highlighting Oracle's recent stock performance and growth in cloud services compared to Amazon's established position in e-commerce and cloud infrastructure [1][3]. Company Overview - Oracle has transformed many of its on-premise applications into cloud-based services and expanded its public cloud infrastructure, generating 32% of its revenue from cloud services in fiscal 2024 [2][4]. - Amazon, primarily an e-commerce giant, also leads in cloud infrastructure through Amazon Web Services (AWS), which is crucial for its profitability [2][8]. Financial Performance - Oracle's cloud-based services revenue grew by 26% in fiscal 2024, showing a slight slowdown from 29% growth in fiscal 2023, while total revenue rose by 6% [4][5]. - AWS revenue increased by 19% in 2024, driven by the AI market, although it only accounted for 17% of Amazon's net sales but 58% of its operating profit [8][9]. Growth Projections - Analysts expect Oracle's revenue and earnings per share (EPS) to grow at a compound annual growth rate (CAGR) of 12% and 20% from fiscal 2024 to 2027, largely due to the expansion of Oracle Cloud Infrastructure (OCI) [6][7]. - For Amazon, revenue and EPS are projected to grow at a CAGR of 10% and 20% from 2024 to 2027, as the macro environment improves and the AI market expands [12]. Competitive Landscape - Oracle faces competitive threats from larger cloud providers like AWS and Microsoft Azure, which are expanding their integrated database services [7]. - Amazon's flexible business model allows it to subsidize its lower-margin e-commerce growth with higher-margin AWS revenue, but it must contend with competition from both cloud and e-commerce rivals [10][11]. Investment Considerations - Oracle has outperformed Amazon over the past three years due to its resilient cloud business amid macroeconomic challenges, while Amazon's e-commerce segment was more affected [13]. - Despite Oracle's lower forward valuation at 33 times earnings compared to Amazon's 36, both stocks are not considered bargains at present [14][15].