Oracle (ORCL 5.98%) 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.
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AI is moving the needle in a big way for Oracle
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.
NYSE: ORCL
Key Data Points
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%.
The valuation and the future growth potential make the stock a no-brainer buy
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.
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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.
