03:51 PM EDT, 03/12/2024 (MT Newswires) -- Oracle's (ORCL) growth in remaining performance obligations, or RPO, in its fiscal third quarter was "impressive," though investors will likely be focused on the durability of that growth, Morgan Stanley said Tuesday.

The software maker's total RPO surged 29% to an all-time high of more than $80 billion in the quarter, driven by "large new cloud infrastructure contracts," Chief Executive Safra Catz said late Monday. Adjusted earnings rose to $1.41 a share in the three months ended Feb. 29 from $1.22 a year earlier, higher than the Capital IQ-polled consensus of $1.38. Revenue grew 7% to $13.28 billion, but missed Wall Street's $13.29 billion view.

The third-quarter RPO represented a $15 billion sequential gain following a $500 million growth in the prior quarter, Morgan Stanley said in a note. "While undoubtedly an impressive RPO result for the quarter, the key question for investors likely turns to the durability of that growth."

On an annual basis, current RPO-based bookings growth soared to 26%, but is up roughly 1% in the first nine months of the fiscal year, Morgan Stanley said. Despite the surge in RPO, total billings were up 5% year over year and current billings rose 8% in the third quarter, according to the note.

Growth in Oracle Cloud Infrastructure, or OCI, was "more durable than feared," slowing to 52% on an annual basis in constant currency from 55% in the previous quarter, following a much sharper decline from 72% growth seen in the first quarter, the brokerage said.

"The Oracle strategy of targeting large multiyear contracts for OCI is likely to be lumpy, which means some bad quarters (Q1 and Q2) and some good quarters (Q3) in terms of bookings growth," Morgan Stanley said. However, "one quarter does not make a trend, and the trendline at Oracle still signals mid-to-high single digit growth."

The firm reiterated its equal-weight rating on the Oracle stock while increasing its price target to $115 from $106. The shares were up 12% in late Tuesday afternoon trade.

For the fourth quarter, the company expects non-GAAP EPS of $1.62 to $1.66, Catz said on an earnings conference call late Monday, according to a Capital IQ transcript. The Street is looking for $1.65. Revenue growth, including Cerner, is pegged at 4% to 6%, according to Catz. Oracle continues to expect fiscal 2024 revenue, excluding Cerner, to accelerate annually and be "significantly higher" next year, Catz told analysts. Cerner, which is a "significant" headwind" this year, is expected to return to growth in 2025, she said.

"As demand for our cloud services continues getting stronger, our pipeline is growing even faster and our win rates are going higher as well," Catz said. "As our supply constraints ease, revenue growth rates will accelerate higher as our capacity expands and we get into fiscal (2025)."

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