NEW YORK (TheStreet) –- Oracle (ORCL) - Get Report has taken the cloud by storm, and the sweeping steps it's taken to embrace this fast-growing business make it one of the top cloud companies to watch out for in 2015, analysts say.
Before reporting second quarter earnings Wednesday, the world’s second largest software company, which has struggled to compete with nimbler rivals like Salesforce.com (CRM) - Get Report , assured investors it would become a central player in cloud-based services.
With cloud revenues surging 45% year over year to $516 million in the second quarter, Oracle delivered on that promise. The company also said its software and cloud revenue grew 5% year over year to $7.3 billion. This was enough to send the stock soaring more than 7% Thursday, to $44.22.
But can this strength in Oracle shares last?
Oracle is adjusting to a software industry that is moving away from on-premise systems to cloud-based systems. Companies no longer want to manage their own servers onsite. Instead, they're embracing the type of on-demand cloud service offered by the likes of Salesforce.com and Workday (WDAY) - Get Report -- a platform known as SaaS (software-as-a-service).
Wednesday's cloud results, however, show that Oracle's transition has begun to accelerate. The 45% year-over-year jump in cloud-based software, platform and infrastructure products means that Oracle is appealing to its customers and the company is not losing ground to the likes of SAP (SAP) - Get Report and IBM (IBM) - Get Report .
Oracle demonstrated that it's becoming less reliant on its low-margin business of selling software licenses through monthly subscriptions. Revenue from that business declined 4% year over year during the quarter, reaching just $2 billion -- and that's a good thing.
All told, Oracle said revenue for the quarter ended Nov. 30 reached $9.6 billion, topping analysts' estimates of $9.5 billion, according to Thomson Reuters. The company reported net income of $2.5 billion, or 56 cents a share. On an adjusted basis, earnings were 69 cents a share, beating estimates by 1 cent a share.
Cantor Fitzgerald analyst Brian White was impressed with Oracle's results and the company's cloud growth, saying, "It's a transition, you can't just change on a dime. But they are making that change, and that's why they are going to be a big winner in the cloud. Not everyone will."
White wasn't the only one singing Oracle's praises after the results were already out.
On Monday, however, analyst Keith Weiss of Morgan Stanley took a bold step, raising his rating on Oracle shares to overweight from equal weight, and setting a 12-month price target of $50 -- suggesting gains of 21.6%.
Weiss cited Oracle's prospects in cloud computing and suggested that Oracle shares can command the same valuation multiple that Microsoft (MSFT) - Get Report shares have enjoyed the past two years. Weiss' upgrade is looking pretty strong today. And in his estimation, Oracle's cloud growth will last at least for the next two years.
To that end, as more customers migrate towards the cloud, Oracle is positioning itself to grow market share through the cloud-based database it introduced in September, as well as its moves toward expanding its product line, making it one of the top cloud companies to watch out for in 2015.
At the time of publication, the author held no position in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
This article is commentary by an independent contributor. At the time of publication, the author held TK positions in the stocks mentioned.