Oracle Stock (ORCL) Sustains Bullish Posture and Charges into the AI Era
Multinational technology magnate Oracle (ORCL) is storming the AI frontier, riding a massive wave of demand for its cutting-edge cloud infrastructure and AI-powered solutions. From blockbuster deals with OpenAI and NVIDIA (NVDA) to a $130 billion backlog, Oracle's performance across the board screams momentum. This surge is fueling explosive top and bottom-line growth, while its exciting EPS outlook makes the current valuation a steal. With the stock now up almost 40% since this time last year, I remain firmly bullish on ORCL.
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Cloud Infrastructure Powers the AI Revolution
Oracle's primary growth engine today is its Cloud Infrastructure (OCI), which is capitalizing on the AI boom sweeping the tech industry. In its most recent fiscal Q3, OCI revenue surged 51% year-over-year to $2.7 billion, outpacing major hyperscale competitors such as AWS and Azure.
CEO Safra Catz pointed to 'record-level AI demand' as the key catalyst, with Oracle securing major cloud contracts with OpenAI, xAI, Meta (META), Nvidia, and AMD (AMD). These agreements contribute to a $130 billion backlog, up 62% from the previous year, underscoring Oracle's growing role in powering large-scale AI model development and deployment.
Oracle's edge lies in its focus on high-performance computing and scalable infrastructure. A prime example is its deal with NVIDIA: Oracle is investing $40 billion to acquire 400,000 GB200 superchips, which will be used to build a massive AI-focused data center in Texas, expected to be operational by mid-2026. It's an ambitious move, but one that is positioning Oracle as a key player in the AI infrastructure space. Demand is strong, and with its advanced data center capabilities, Oracle appears to be just getting started.
Oracle Expands Product Ecosystem with Strategy
Oracle's strategy of forming strategic alliances is laying the foundation for long-term growth. A standout example is its multi-cloud partnership with AWS, which enables customers to access Oracle databases across platforms with ease. The results are already materializing—multi-cloud revenue grew tenfold year-over-year in Q3. This approach allows Oracle to collaborate with competitors while expanding its footprint in the AI space, reinforcing its leadership in hybrid and sovereign cloud environments tailored to enterprise needs.
Another major initiative is Stargate, Oracle's ambitious AI infrastructure project with OpenAI and SoftBank. Oracle isn't just supplying compute power—it's helping to build a full ecosystem that supports advanced AI innovation. CEO Safra Catz also noted that bookings are converting to revenue more quickly than expected, with a 57% increase in OCI consumption revenue. These aren't just headline-grabbing deals—they're translating into real, accelerating growth.
Cloud Applications Become the Unsung AI Heroes
While OCI grabs the spotlight, Oracle's cloud applications, like Fusion Cloud ERP and NetSuite, are quietly powering its AI story. In Q3, cloud application revenue rose 9% to $3.6 billion, with strategic back-office SaaS applications growing 18% to $8.6 billion annually. If you are unfamiliar, these platforms utilize AI to streamline enterprise operations, from financial planning to supply chain management. For example, Fusion Cloud ERP's AI-driven analytics are deployed by companies like Walmart (WMT) to optimize workflows, aiming to boost efficiency and margins. As the chart shows, ORCL's revenues are inching higher while profit margins are sluggish, for the time being at least.
What's notable about this is how these applications integrate with Oracle's broader AI ecosystem. As customers using NetSuite can tap into OCI's AI capabilities, a seamless flow of data and insights is created. This synergy drives stickiness. Once a company adopts Oracle's cloud apps, it's hooked on the ecosystem. The 16% growth in ERP revenues indicates that enterprises are betting on Oracle to modernize their operations with AI at its core.
The Road to Valuation Upside Through EPS Acceleration
Oracle's focus on high-margin areas like OCI and cloud applications is a recipe for margin expansion. The company's adjusted operating margin hit 44% in Q3, and with cloud revenue growing faster than lower-margin segments like software licenses (down 8%), profitability is set to climb. In the interim, consensus estimates project 8% EPS growth for fiscal 2026, accelerating to 12%, 22%, and 31% over the next three years as AI revenues scale. This trajectory shows that the market expects Oracle to convert its $130 billion backlog into high-margin cash flows.
Hence, at 28x this year's expected EPS, Oracle's valuation might raise eyebrows, but I think the numbers tell a different story. The projected EPS growth, fueled by AI-driven cloud demand, suggests the stock is reasonably priced with room to run. As Oracle doubles its data center power capacity this year and triples it by fiscal 2026, revenue and earnings are set to accelerate, making today's price a bargain for long-term investors.
Is ORCL Stock a Buy, Sell, or Hold?
Wall Street appears relatively bullish on Oracle's prospects. ORCL stock has a Moderate Buy consensus rating, with 16 analysts currently bullish and 14 neutral. ORCL's average stock price target of $178.42 indicates a somewhat constrained upside potential of less than 1% over the coming twelve months.
Oracle's AI-Powered Future Beckons
Oracle's recent performance deserves serious attention from investors. This is no longer just a legacy database company—between the rapid expansion of Oracle Cloud Infrastructure (OCI), strategic partnerships, and AI-enhanced cloud applications, Oracle is positioning itself as a major contender in the AI space.
With a $130 billion backlog and accelerating EPS growth projected in the coming years, the fundamentals are strong. At current levels, the stock offers a compelling blend of growth potential and attractive valuation. Bottom line: Oracle's AI journey is still in its early stages, and there could be meaningful upside ahead.
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