What happened

Shares of enterprise software giant Oracle (ORCL -1.41%) rallied 12.4% in the month of June, according to data from S&P Global Market Intelligence.

Traditionally the dominant player in on-premises enterprise databases, Oracle finds itself in transition to a more cloud-based company, as well as a challenger to the three large cloud infrastructure companies in the age of artificial intelligence.

Despite some skepticism, last month's fiscal fourth-quarter earnings report seemed to show Oracle handling the transition well, with accelerating cloud growth and market share gains leading to a solid beat.

So what

For its fiscal fourth quarter ended May 31, Oracle grew revenue by 18%, or 22% in constant currency, along with non-GAAP (adjusted) earnings per share of $1.67, which also beat analyst expectations.

Perhaps more importantly than the overall figures, investors were likely looking to the "as-a-service" segment for clues as to how Oracle is navigating the cloud transition. Forty years ago, Oracle rose to dominance with its on-premises database software; however, with the transition to subscription and usage-based cloud computing, some have wondered how Oracle would adapt to competitive challenges from cloud-based databases with new architectures such as MongoDB or threats from the large cloud giants like Amazon.com and others.

The results show Oracle is doing quite well, thank you very much. In the quarter, total cloud revenue, including software and infrastructure-as-a-service, grew 54%, while the IaaS portion grew a hefty 76%. That acceleration appeared to show Oracle holding its own in the cloud era, despite its late entrance.

Founder and Chief Technology Officer Larry Ellison added that the company's "Gen2" cloud is attracting enterprise and start-up customers looking for optimized AI infrastructure -- a hot topic these days indeed. Ellison noted on the conference call with analysts that even AI chip leader Nvidia (NVDA -0.60%) uses Oracle's cloud clusters, as do AI start-ups Mosaic ML, Adept AI, Cohere, and other start-ups that have collectively committed $2 billion to Oracle cloud via new contracts.

Unsurprisingly, numerous Wall Street analysts either upgraded their ratings or price targets in the aftermath of earnings.

Speaking of Cohere, a start-up developing large language models (LLMs), June also saw Oracle lead a $270 million funding round in the new AI start-up along with Nvidia and Salesforce. Then later in the month, Oracle announced it would team up with Cohere to launch powerful generative AI services for businesses, infusing Cohere's LLMs into usable software applications running on the Oracle Cloud Infrastructure (OCI).

Now what

We are in somewhat early days in the cloud computing transition and extremely early days in the AI revolution. And while there was and still is some consternation around how legacy tech giants like Oracle will adapt, Oracle's fourth-quarter results, new investments, and partnerships seem to indicate the company isn't falling behind.

Oracle currently trades around 21 times its fiscal 2024 analyst projections and 18.5 times 2025 earnings projections. That's not particularly expensive for a leading cloud and AI infrastructure stock. So as long as Oracle can continue to defy skeptics, its stock is likely to continue marching higher.