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Oracle (ORCL) Expands Cloud Presence in Spain With $1B Outlay

Oracle ORCL has announced plans to invest more than $1 billion in Spain over the next decade in a significant move to bolster its presence in the European cloud market. This investment will primarily fund the construction of a third cloud region in Madrid, complementing the company's existing infrastructure in the country.

The investment aims to drive AI skills development across Spain, positioning ORCL as a key player in the country's digital transformation. The company's ability to offer AI services alongside its full suite of cloud solutions could give it a competitive edge in the market.

Oracle's collaboration with Telefonica España as the host partner for the planned cloud region demonstrates its strategy of leveraging local expertise and infrastructure.

The new cloud region will help Oracle's customers address stringent EU regulations, including the Digital Operational Resilience Act and European Outsourcing Guidelines. This is particularly crucial for Spain's prominent financial services sector, which faces unique regulatory challenges.

Oracle is offering a separate EU Sovereign Cloud, emphasizing its commitment to data privacy and regional control. This move aligns with growing concerns about data localization and sovereignty across Europe.

The announcement has been welcomed by Spanish government officials, highlighting the potential for job creation and economic growth. This public sector support could prove invaluable as ORCL seeks to expand its footprint in the country.

Oracle Corporation Price and Consensus

Oracle Corporation Price and Consensus
Oracle Corporation Price and Consensus

Oracle Corporation price-consensus-chart | Oracle Corporation Quote

Tech Giants Battle for Dominance in Europe's Booming Cloud Market

The expansion comes at a critical time as demand for AI and cloud services surges across Spain and the broader European Union.

Oracle faces stiff competition from other cloud giants like Amazon AMZN-owned Amazon Web Services (“AWS”), Microsoft MSFT Azure and Alphabet GOOGL-owned Google Cloud, all of which have been aggressively expanding their European presence.

AWS, the global leader in cloud services, has maintained its strong position in Europe with a €2.5 billion investment plan in Spain announced in 2022. Not to be outdone, Microsoft Azure has been gaining significant ground. The company's strategic partnership with Telefónica in Spain, announced in 2020, exemplifies its approach of collaborating with local telecom giants to enhance its market presence. Google Cloud, while currently the smallest of the three, has been making aggressive moves. Its €1 billion investment in Germany, announced in 2021, signals the company's determination to capture a larger share of the European market.

Despite these challenges, Oracle's substantial investment signals its confidence in the Spanish and broader European markets. As organizations across industries accelerate their digital transformation efforts, ORCL's expanded presence could play a pivotal role in shaping Spain's technological future.

Oracle is positioning itself as the only hyperscaler capable of delivering AI and a full suite of 100+ cloud services across dedicated, public and hybrid cloud environments globally.

For the first quarter of fiscal 2025, total cloud revenues are expected to grow in the range of 21-23% in constant currency and 20-22% in dollar terms. The company expects fiscal 2025 cloud infrastructure services to grow 50% faster than fiscal 2024.

Shares of this Zacks Rank #3 (Hold) company have gained 33.1% year to date compared with the Zacks Computer and Technology sector’s growth of 9.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company's focus on sovereign cloud offerings and industry-specific solutions (particularly for financial services) could be a key differentiator in the Spanish market.

The Zacks Consensus Estimate for ORCL’s fiscal 2025 revenues is pegged at $57.45 billion, indicating year-over-year growth of 8.5%. The consensus mark for fiscal 2025 earnings is pegged at $6.14 per share, down by a penny in the past 30 days. The figure indicates year-over-year growth of 10.4%.

However, investors should wait for a better entry point for Oracle due to intense competition and stretched valuation. The company will need to navigate the complex landscape of EU data protection laws and ensure its services meet the evolving needs of both public and private sector clients.

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