Oracle's Cloud Infrastructure Surge Fueled by AI Demand

1 Magnificent Growth Stock to Buy Before It Soars Higher After This Event | The Motley Fool

Oracle (ORCL -2.73%) stock has been in fine form on the market over the past couple of months, gaining 77% from its April 21 52-week low. And it looks like this technology giant is primed for more upside following the release of its latest quarterly report. Oracle reported its fiscal 2025 fourth-quarter results (for the three months ended May 31) on June 11. The market reacted positively, pushing the price higher for reasons that aren't all that surprising. Oracle, which made its name by selling database management software, now benefits from the tremendous demand for its cloud infrastructure services. The company not only delivered better-than-expected numbers, but it also issued solid guidance that points toward an even better year. Let's take a look at Oracle's latest report and why it may be a good idea to buy the stock right away. Oracle ended fiscal 2025 with $57.4 billion in annual revenue, up 9% in constant currency terms. The company expects to deliver at least $67 billion in revenue in fiscal 2026 (a jump of almost 17%). Don't be surprised to see Oracle clock even stronger growth, as only some of the company's artificial intelligence (AI)-related catalysts are baked into the guidance. On the earnings call, Oracle Chief Technology Officer Larry Ellison said that the company's revenue pipeline could be much larger than what it is projected in the earnings report. The cloud giant reported a 41% year-over-year increase in its remaining performance obligations (RPO) in fiscal Q4 to $138 billion. RPO refers to the total value of Oracle's contracts that are yet to be fulfilled at the end of a quarter, and the massive increase in this metric explains why it is expecting a stronger top-line increase this year. CEO Safra Catz projects the company's RPO will more than double in fiscal 2026, outpacing the projected growth in its revenue, which can set the stage for years of strong growth for the company. This massive increase in Oracle's RPO can be attributed to the stunning demand for its cloud infrastructure, which is being used for AI training and inference purposes by customers. According to Ellison, Oracle could be understating its RPO if the $500 billion Stargate AI infrastructure project it is a part of pans out as expected. Oracle is one of the key technology partners and funders of the OpenAI-led venture that's backed by SoftBank and Abu Dhabi-based MGX, and it will "closely collaborate to build and operate" AI infrastructure as a part of this project. Meanwhile, the booming demand for cloud AI infrastructure to train and deploy AI applications in general is going to be a long-term tailwind for Oracle, which is finding it difficult to deploy enough capacity to meet the demand. Ellison told analysts on the earnings call that one of its customers wanted to buy Oracle's entire cloud capacity. Not surprisingly, Oracle is going to build 30 dedicated data centers in fiscal 2026, apart from the existing 29 that it already has. It also plans to increase its MultiCloud data centers, which it operates with other major cloud computing providers such as Amazon, Alphabet's Google, and Microsoft, from the current strength of 23 by building another 47 MultiCloud data centers over the next year. This focus on capacity expansion is the reason why the company is forecasting Oracle Cloud Infrastructure (OCI) revenue to grow at a faster pace of 70% in fiscal 2026, following a 50% jump last year. In all, Oracle could be at the beginning of a terrific growth curve, considering the potential catalysts such as Stargate and the opportunity in the cloud infrastructure-as-a-service (IaaS) market that's expected to generate a whopping $712 billion in revenue by 2032, growing at an annual rate of 21%. Oracle delivered non-GAAP (adjusted) net income of $6.03 per share in fiscal 2025, an increase of 8.5% from the prior year. Investors should note that the company's capital expenses more than tripled during the year to $21.2 billion. Its forecast of $25 billion in capital expenses for fiscal 2026, which points toward a slower increase from last year, explains why analysts expect faster bottom-line growth from Oracle this year, and beyond. Moreover, the company seems on its way to crushing its own long-term expectations. Oracle pointed out last year that it expects to hit $66 billion in revenue in fiscal 2026, but its forecast points toward a bigger jump. Also, Oracle expects its bottom line to grow at an annual pace of more than 20% through fiscal 2029. Oracle could eventually do better than that as the market it is serving is massive and the revenue pipeline it is building is remarkable. All this makes Oracle a top AI stock to buy right now as it is trading at just 31 times forward earnings. That's in line with the Nasdaq-100 index's earnings multiple, suggesting that investors can buy Oracle right now at a very attractive valuation, considering the healthy upside it could deliver in the long run.

Oracle: Maintaining Buy Rating On Strong OCI Momentum And Unique Position In Multi-Cloud

While high CapEx and debt levels are risks, they reflect surging demand; the Stargate project could further accelerate Oracle's leadership in AI cloud infrastructure. A few months ago, I published the article The Cloud Underdog? Why Oracle's 3% Market Share Signals a Strong Upside. In this article, I explained why I believe Oracle (NYSE:ORCL) has the potential to expand its I am a 33-year-old investor and former hedge fund trader with a background in software engineering and finance. My career began in a small investment house where I trained as an analyst, gaining fundamental insights into the financial markets. I then transitioned into programming, working as a software engineer at Check Point, where I sharpened my technical skills. This combination of analytical and technical experience eventually led me to a hedge fund, where I traded U.S. equities for seven years, specializing in long-short strategies focused on macroeconomic trends and tech stocks. My primary area of expertise lies in growth stocks within the technology sector. I seek out companies with the potential for above-market returns over the medium term, prioritizing innovation, scalability, and market disruptiveness. Additionally, I employ a long-short strategy on indices, leveraging macroeconomic analysis to navigate market cycles. I am motivated to write on Seeking Alpha to share insights and analyses that offer investors a balanced view of market opportunities and risks. My goal is to build a community of informed readers who can benefit from my approach to growth stocks and macroeconomic trends. Analyst's Disclosure:I/we have a beneficial long position in the shares of ORCL either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.