Oracle Soared Due to Its AI Prospects. Is It Too Late to Invest in the Stock?

Key Points

• Oracle’s recent quarterly results have slightly fallen short of expectations, yet the company has experienced a notable increase in contract signings during that time.

• The firm anticipates its cloud infrastructure revenue will grow more than tenfold over the next five years.

• To accommodate the rising demand for its services, Oracle will need to invest significantly in expanding its data center capacity.

It’s not every day that a stock skyrockets, but that’s what happened after Oracle’s latest quarterly results, which disappointed analysts in terms of revenue and profits. Following their first-quarter report for 2026, there’s been a noticeable market buzz around their cloud computing segment, and Oracle’s stock has more than doubled this year.

Now, let’s delve a bit into Oracle’s revenue figures and future prospects.

Cloud’s Excitement

Interestingly, in the cloud computing arena, Oracle might benefit from being a later mover. With the surge in Artificial Intelligence (AI), their cloud services are relatively new but are rapidly evolving with cutting-edge technologies. Consequently, many leading AI model companies are turning to them for support, even as major cloud providers like Amazon, Alphabet, and Microsoft form partnerships with the company.

Oracle sees a significant opportunity in the inference space. They highlight that customers can seamlessly convert all their databases and cloud storage into usable data, which can then be integrated with large language models (LLMs) using both proprietary and public data for insights. Interestingly, the AI inference market is projected to overshadow AI training in size over time.

Oracle’s strong performance in the cloud computing space is evident in their recent quarterly figures. Cloud infrastructure revenue surged by 55% year-over-year, reaching $3.3 billion. Astonishingly, the revenue from multi-cloud databases provided by major cloud players jumped by an impressive 1,529% in the same quarter. Investors were particularly enthused by projections, estimating that cloud infrastructure revenue could expand from $10.3 billion to $144 billion by fiscal 2030.

Here’s a brief overview of Oracle’s forecast for cloud infrastructure revenue:

Management noted that a significant portion of this revenue is already secured, with remaining performance obligations (RPOs) totaling $455 billion—a substantial 359% increase from the previous year. This growth stems largely from signing four significant contracts with various customers during the quarter.

On the total revenue front, Oracle’s numbers rose by 12% to $14.93 billion, which fell short of the $15.04 billion analysts had been anticipating. Cloud revenues increased by 28% to $7.2 billion, with cloud infrastructure revenues hitting $3.3 billion and cloud application revenues growing to $3.8 billion.

In terms of earnings per share, the adjusted EPS was up 6% to $1.47, slightly missing the $1.48 forecast by analysts.

Looking ahead, Oracle anticipates a revenue growth of 16% on a constant currency basis for 2026. However, capital expenditures are expected to rise significantly, with planned spending increasing from a previous estimate of $25 billion to $35 billion. Much of this expenditure is earmarked for GPU investments.

For the second quarter, the projection is for year-on-year revenue growth of 14% to 16%, and cloud revenue growth to be around 32% to 36%. The adjusted EPS is expected to climb between 10% and 12%, suggesting a range of $1.61 to $1.65.

Is It Too Late to Buy Stocks?

Oracle’s anticipated cloud infrastructure growth over the next five years looks quite impressive. With contracts coming through, a clearer financial picture is emerging. That said, considerable resources will need to be allocated to enhance capacity to meet these obligations. Plus, when you weigh Oracle against the larger cloud infrastructure companies, it’s not exactly on equal footing.

Oracle carries over $80 billion in debt and hasn’t generated free cash flow recently, instead funneling all revenues into expanding data center capabilities. It recorded $20.8 billion in operational cash flow last year, with $8.1 billion in the last quarter. This positioning contrasts starkly with the financial standings of the larger cloud providers.

From a valuation perspective, Oracle trades at a forward P/E ratio close to 50 based on estimates for fiscal 2026, which isn’t cheap by any means.

Considering Oracle’s current valuation, balance sheet circumstances, and the required future capital outlay, I haven’t felt compelled to chase after their stock following its recent surge.

Should I Invest $1,000 in Oracle Now?

Before deciding to buy Oracle stock, it’s worth reflecting on a few points.

An analyst team has chosen what they consider the 10 Best Stocks to invest in right now—and Oracle didn’t make the list. Those selected stocks are believed to have greater potential for substantial returns down the line.

When evaluating past successes, take Netflix: if you had invested $1,000 when they recommended it back in December 2004, it would be worth about $649,037 today! Similarly, with NVIDIA, a $1,000 investment from April 2005 would now yield around $1,086,028!

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