ORACLE surged 11 per cent after signalling that growth in its closely watched cloud computing business is stabilising, showing progress in its bid to capture more market share in the competitive market.

Cloud revenue jumped 25 per cent to US$5.1 billion in the period that ended in February, the company said on Monday (Mar 11), surpassing Wall Street’s US$5.06 billion estimate. Of that, US$1.8 billion came from renting out computing power and storage over the Internet and US$3.3 billion from applications.

The Austin-based company, known for its database software, is focused on expanding its cloud infrastructure business to compete with Amazon.com, Microsoft and Alphabet’s Google. That effort has faced headwinds in recent quarters as growth rates slowed. But there were signs of stabilising in the third quarter with sales gaining at nearly the same pace as the three months preceding it.

The remaining performance obligation, a measure of backlogged sales, was US$80 billion at the end of the quarter. That’s significantly ahead of the US$59 billion expected by analysts. chief executive officer Safra Catz pointed to this figure, which she said was driven by “large new cloud infrastructure contracts signed in the third quarter”, as evidence of customer momentum.

“We expect to continue receiving large contracts reserving cloud infrastructure capacity,” Catz said, adding that Oracle is “very rapidly” opening new cloud data centres to meet demand.

Shares jumped to as high as US$126.46 in extended trading. Oracle’s stock was down about 10 per cent over the past six months to Monday’s close, lagging the iShares software ETF, which gained 16 per cent.

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The results were “certainly better than feared”, said Jeffries analyst Brent Thill noting that other cloud vendors such as Amazon and Microsoft have similarly reported strong results recently.

Total sales in the fiscal third quarter increased 7.1 per cent to US$13.3 billion, roughly in line with analysts’ estimates, according to data compiled by Bloomberg. Profit, excluding some items, was US$1.41 a share, compared with the average estimate of US$1.38.

Sales of Fusion software for managing corporate finance increased 18 per cent in the quarter from a year earlier. Revenue from NetSuite, enterprise planning tools aimed at small- and mid-sized companies, was up 21 per cent. Revenue from both businesses gained 21 per cent in the previous period.

After acquiring Cerner, the electronic health records company, Oracle has been focused on modernising the legacy software business. It “finished moving the majority of Cerner customers” to Oracle cloud infrastructure in the quarter, chairman Larry Ellison said. Further updates over the coming year, such as a new suite of applications, will “transform Cerner and Oracle Health into a high-growth business for years to come”, he added. BLOOMBERG