Tech companies are anticipating substantial growth in cloud computing over the coming years.
It’s somewhat rare for a stock to suddenly soar, but that’s exactly what happened with Oracle (ORCL), especially after falling short of analysts’ revenue and profit expectations. This surge follows their first quarter report for 2026, where excitement in the market was largely fueled by the expansion of their cloud computing sector. So far this year, Oracle’s stock has more than doubled.
Let’s take a deeper look at their revenue updates and potential moving forward.
Cloud’s Excitement
There are definite perks to being a late mover, and it seems Oracle has capitalized on this in the cloud computing landscape. Before the rush in artificial intelligence, Oracle’s cloud unit was relatively new and small. However, they’ve rapidly scaled it up, integrating the latest technologies. Consequently, major AI model companies are increasingly turning to their services, and even the top three cloud infrastructure providers—Amazon, Alphabet, and Microsoft—have formed partnerships with them.
Oracle is particularly enthusiastic about opportunities in the reasoning sector. They’ve mentioned a significant advantage as customers can “automatically transform” their Oracle databases and cloud storage into actionable data. This allows them to utilize large-scale language models to respond to queries, blending private enterprise data with public information. Over time, the AI inference market is projected to grow larger than the AI training market.
The power of Oracle’s cloud can be seen in their latest quarterly results. Cloud infrastructure revenues jumped 55% year-over-year, totaling $3.3 billion. Moreover, multi-cloud database revenue from the top three providers experienced a staggering increase of 1,529% this quarter. Investors were particularly thrilled by Oracle’s forecast that cloud infrastructure revenue could hit between $10.3 billion to $144 billion by fiscal 2030.
Here’s a snapshot of Oracle’s cloud infrastructure revenue estimates:
| Metric | Fiscal 2026 | Fiscal 2027 | Fiscal 2028 | Fiscal 2029 | Fiscal 2030 |
|---|---|---|---|---|---|
| Cloud Infrastructure Revenue | $18 billion | $32 billion | $73 billion | $114 billion | $144 billion |
Note: Oracle’s fiscal year concludes on May 31st of each calendar year.
Management expressed that a significant portion of this revenue is already secured. They have $455 billion in remaining performance obligations (RPOs), with most contracts being generally non-cancellable. This reflects a remarkable 359% rise from last year, up from $138 billion, which had been $99 billion. The impressive growth follows the signing of four major contracts with different clients in the last quarter.
Oracle’s total revenue grew by 12% to $14.93 billion, but this slightly fell short of the $15.04 billion anticipated by analysts. Cloud revenues climbed 28% to $7.2 billion, while within the cloud segment, infrastructure revenues increased by 55% to $3.3 billion, and application revenues rose by 11% to $3.8 billion.
On a positive note, adjusted earnings per share rose by 6% to $1.47, although this was just below the $1.48 predicted by analysts.
Looking ahead, Oracle projects a 16% increase in revenue based on constant currency for 2026. They’ve also elevated their capital expenditure budget to $35 billion from the earlier $25 billion, primarily directing this funding towards graphics processing units (GPUs) and other technologies.
In the second quarter, revenues are expected to rise by 14% to 16% year-over-year, with cloud revenues increasing by 32% to 36%. They predict that adjusted EPS will grow by 10% to 12%, landing between $1.61 and $1.65.
Is It Too Late to Buy Stocks?
The anticipated growth in Oracle’s cloud infrastructure over the next five years is certainly impressive. The existing contracts provide clarity on future earnings. However, it’s essential to remember that substantial investments are required to enhance capacity and fulfill these commitments, which may challenge their financial stance compared to the top three cloud providers.
Currently, Oracle carries over $80 billion in debt and has reported no free cash flow over the past year or in the first quarter. With operational cash flow standing at $20.8 billion last year and $8.1 billion in the recent quarter, keeping debt manageable over the next five years is crucial for developing additional data centers. This situation appears starkly different from that of the top three cloud computing firms.
On the valuation front, Oracle isn’t exactly cheap, trading at around a 50 forward P/E based on analyst predictions for fiscal 2026.
Considering Oracle’s valuation, balance sheet condition, and significant future capital expenses, I haven’t pursued their stock after such a considerable increase.
