How to Invest in Oracle

Oracle (ORCL 0.09%) is a behemoth in the software world. Its database software is indispensable for many companies, and its cloud computing businesses are growing fast.

Like many of its rivals in the tech sector, Oracle is embracing artificial intelligence (AI), which is driving accelerated growth for the tech giant. Demand for its Gen2 AI infrastructure was stronger than supply in mid-2024 despite the company's heavy investments to rapidly expand its data center capacity and position itself for strong growth in the coming years.

Oracle's dominant position in database software and accelerating AI-driven cloud computing business has many investors interested in its stock these days. This guide will teach you everything you need to know about investing in Oracle and how to buy the technology stock.

How to buy

How to buy Oracle stock

Anyone can buy shares of Oracle. The technology company trades on the New York Stock Exchange under the ticker ORCL. You can easily purchase shares through a brokerage account. Here's a four-step guide to show you how to invest in stocks.

Step 1: Open a brokerage account

You'll have to open and fund a brokerage account before buying shares of any company. If you need to open one, here are some of the best-rated brokers and trading platforms. Take your time researching the brokers to find the best one for you.

Step 2: Figure out your budget

Before making your first trade, you'll need to determine a budget for how much money you want to invest. You'll then want to figure out how to allocate that money. The Motley Fool's investing philosophy recommends building a diversified portfolio of 25 or more stocks you plan to hold for at least five years.

You don't have to get there on the first day, though. For example, if you have $1,000 available to start investing, you might want to begin by allocating that money equally across at least 10 stocks and then grow from there.

Step 3: Do your research

It's essential to thoroughly research a company before buying its shares. You should learn about its competitors, review its balance sheet, find out how it makes money, and consider other factors to make sure you have a solid grasp on whether the company can grow value for its shareholders over the long term.

Step 4: Place an order

Once you've opened and funded a brokerage account, set your investing budget, and researched the stock, it's time to buy shares. The process is relatively straightforward. Go to your brokerage account's order page and fill out all the relevant information, including:

• The number of shares you want to buy or the amount you want to invest to purchase fractional shares.
• The stock ticker (ORCL for Oracle).
• Whether you want to place a limit order or a market order. The Motley Fool recommends using a market order because it guarantees you buy shares immediately at market price.

Here's a screenshot of how to buy a stock with the five-star-rated platform Fidelity (which offers a video tutorial and a step-by-step guide):

Once you complete the order page, click to submit your trade and become a shareholder of the software giant.

Should I invest?

Should I invest in Oracle?

Before buying Oracle shares, you should consider whether the stock is right for your situation. Here are some reasons you might want to invest in Oracle:

• You're seeking a solidly profitable technology company with AI-powered upside potential.
• You want to invest in companies with significant insider ownership.
• You want a company that can supply some modest dividend income.
• Buying Oracle would help diversify your portfolio.
• You think Oracle's AI investments will drive accelerated growth in the coming years.
• You want to invest in a company with a history of producing solid total returns.

On the other hand, here are some reasons you might decide not to invest in the technology company:

• You already own several technology stocks.
• You're seeking companies earlier in their growth cycle than Oracle.
• You want more dividend income than Oracle currently provides.
• You're not a fan of Oracle's founder and Chairman, Larry Ellison.
• You're seeking a company with higher total return potential than Oracle.
• You're concerned about the company's competitive position and whether it can maintain its technological edge against start-ups vying for a piece of its market share.

Profitability

Is Oracle profitable?

Analyzing a company's profitability is a key aspect of investment research. Earnings tend to drive a company's stock price over the long term.

Oracle is a very profitable company. In its fiscal 2024 third quarter, it reported $13.3 billion in revenue (up 7% from the prior year) and $3.8 billion in net income. Meanwhile, its non-GAAP (generally accepted accounting principles) operating income was $5.8 billion, or $1.41 per share, up 12% and 16%, respectively.

The company also generates lots of cash. Over the last 12 months, it produced $18.2 billion in operating cash flow and $12.3 billion in free cash flow. Oracle uses its strong cash flow to invest in its business, maintain a strong balance sheet, and return money to shareholders through dividends and share repurchases.

The company expects its profits to continue growing. It aims to grow its annual earnings per share by more than 10% per year through 2026, driven by rising revenue and improving margins.

Dividends

Does Oracle pay a dividend?

Oracle has paid dividends to its shareholders since initiating a payout in 2009. As of mid-2024, the company paid a quarterly rate of $0.40 per share. That gave the software company a 1.4% dividend yield at the time, which was right in line with the S&P 500's dividend yield. The company has increased its dividend steadily over the years:

With its profits likely to grow, Oracle could continue increasing its dividend in the future, which should appeal to investors seeking a solid and growing dividend yield.

ETF options

ETFs with exposure to Oracle

Many investors prefer to be more passive. They don't want to pick a portfolio of stocks they must manage actively. Thanks to the wide availability of exchange-traded funds (ETFs), it's easy to be a passive investor these days. Many ETFs allow you to gain some passive exposure to a company through a thematic strategy or broad market index.

According to ETF.com, 296 ETFs held more than 222 million shares of Oracle in mid-2024. The Vanguard Total Stock Market ETF (VTI 0.77%) was the largest holder, with almost 52 million shares. However, the broad market index fund had a rather small allocation to the technology company at 0.4% of its holdings.

Investors seeking more exposure to Oracle could consider the iShares Expanded Tech-Software Sector ETF (IGV 0.94%). This sector ETF focuses on software companies and had 114 holdings in mid-2024, including Oracle (the third-largest at 8% of its net assets). The fund charges a 0.41% ETF expense ratio to provide passive exposure to the software sector.

Defiance Next Gen Connectivity ETF (FIVG -0.58%) is another ETF with a meaningful allocation to Oracle stock. It focuses on stocks crucial to the rollout of 5G networks. In mid-2024, it held 50 stocks. Oracle was its fourth-largest holding, with a 4.5% allocation. The fund had a 0.3% expense ratio.

Stock splits

Will Oracle stock split?

As of mid-2024, Oracle didn't have an upcoming stock split. Its stock price wasn't too much more than $100 a share at the time, which is reasonably accessible for most investors, so it probably won't split its stock anytime soon. The cloud company has split its stock several times throughout its history:

While a stock split doesn't seem likely in 2024, continued earnings-driven share price appreciation could eventually drive Oracle to split its stock again.

Related investing topics

The bottom line on Oracle

Oracle is a dominant player in the database software market and an emerging leader in cloud computing and AI. Those catalysts drive its view that it can deliver double-digit earnings-per-share growth over the next several years. The profit growth could help drive its stock price higher. Add its rising dividend, and Oracle could be a solid long-term investment opportunity.

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