Oracle Stock (ORCL) Delivers Strong Quarter as Cloud and AI Strategy Pays Off
Oracle (ORCL) has just wrapped up its quarterly reporting period with impressive results. Revenue rose 11% year-over-year to $15.9 billion, beating expectations with ease. Non-GAAP earnings per share came in at $1.70, topping the consensus estimate of around $1.65. In my view, Oracle's bold investments in Cloud services—particularly Oracle Cloud Infrastructure (OCI)—are clearly bearing fruit. I'm bullish on the stock, as Oracle continues to demonstrate resilience and leadership in both Cloud and AI.
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Cloud Growth Takes Center Stage
Oracle's Cloud segments were the clear standouts in Q4. Total Cloud revenue—which includes both Infrastructure as a Service (IaaS) and Software as a Service (SaaS)—jumped 27% year-over-year to roughly $6.7 billion. The real highlight was Oracle Cloud Infrastructure (OCI), which surged 52% to reach $3 billion, underscoring Oracle's aggressive push to capture AI-heavy workloads in the Cloud Infrastructure space.
A key driver behind Oracle's Cloud momentum is its smartly executed multi-cloud strategy. On the earnings call, Larry Ellison revealed that Oracle's MultiCloud database services—used by customers on Amazon (AMZN), Microsoft Azure (MSFT), and Google Cloud (GOOGL) —soared 115% quarter-over-quarter. This approach is savvy, as it turns would-be rivals into collaborators. With enterprise demand rising for hybrid and multi-cloud solutions, Oracle is carving out a distinct competitive edge among the major cloud providers.
Record Backlog Signals Solid Revenue Growth Ahead
One of the key reasons I'm bullish on Oracle's long-term growth is its record-high backlog of contracts, formally known as Remaining Performance Obligations (RPO). This quarter, RPO surged 41% year-over-year to an all-time high of $138 billion. That's a strong signal of sustained demand, providing a significant level of revenue visibility and stability for shareholders over the coming years.
Management attributed much of this backlog growth to major contracts with companies like OpenAI, Meta (META), Nvidia (NVDA), and AMD (AMD). CEO Safra Catz expressed evident enthusiasm, projecting that Oracle's Cloud business will grow by more than 40% in Fiscal 2026, with OCI continuing to expand at a rate above 70%. Oracle deserves real credit here—its momentum is undeniable, and Larry Ellison remains the quintessential relentless tech visionary, pushing the company to the forefront of the Cloud and AI revolution.
Heavy Investment Is Necessary for Moat Building
Scaling Oracle's Cloud business comes with a hefty price tag. In FY2025, the company invested roughly $21.2 billion in capital expenditures, reflecting its aggressive buildout of GPU clusters and data centers. While these substantial investments did put some pressure on margins—non-GAAP operating margin dipped slightly to about 44%, down from 47% last year—I view this as a reasonable and strategically sound tradeoff.
Crucially, Oracle remains solidly profitable and financially strong. Operating cash flow for the year reached an impressive $20.8 billion, providing the company with ample capacity to reinvest in future growth. Management made it clear on the earnings call that these upfront investments are designed to drive high-margin, recurring revenue over time, essentially laying the groundwork for long-term profitability. With around $18 billion in cash and short-term investments, Oracle appears to have the financial flexibility to fund its expansion without overburdening its balance sheet.
Oracle Faces Substantial but Surmountable Risks
While I'm optimistic about Oracle's growth potential, it's essential to acknowledge the risks. Management's aggressive expansion strategy hinges on flawless execution and sustained demand. If enterprise IT spending slows, if overall demand for public Cloud services weakens, or if customers shift more quickly toward AWS or Azure, Oracle's growth trajectory could face headwinds.
Additionally, Oracle is making significant capital investments while also aiming to deliver strong returns to shareholders. This high-stakes approach means that any misstep or shortfall in demand could result in the company having costly, underutilized infrastructure. However, given Oracle's recent track record, management's demonstrated competence, and the sheer scale of its secured backlog, I believe these risks are manageable and well within the company's capacity to navigate.
Is Oracle Stock a Good Buy?
On Wall Street, Oracle has a consensus Moderate Buy rating based on 15 Buys, 12 Holds, and zero Sells. The average ORCL price target of $192.91 indicates a 3.5% downside potential over the next 12 months. This means that, despite the company's current operational and financial strengths, the market has likely priced Oracle stock too high in the short term. It's probably best to wait for a pullback before buying shares.
Oracle's Ambitious Bet Has Paid Off
Oracle's quarterly results strengthen my confidence in the sustained upward trajectory of Oracle's operating model. What was once a bold and uncertain Cloud transformation is now clearly delivering results. Oracle's heavy investment in OCI, its strategic focus on multi-cloud architecture and partnerships, and its sizable backlog of signed contracts all point to long-term, market-leading growth that appears both durable and well-earned.
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