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Globe and Mail
37 minutes ago
- Globe and Mail
Oracle Stock Pops as Company Shows It Is Catching Up in the Cloud Race. Here's What That Means for Investors
When it comes to cloud computing, Oracle (NYSE: ORCL) has long been an afterthought to the big three players in the space: Amazon's AWS, Microsoft's Azure, and Alphabet's Google Cloud. However, Oracle is starting to make some noise in the segment and is putting up stats that suggest it is now the fastest grower in the space. Let's delve into Oracle's fiscal Q4 results to see how cloud computing is powering its results and what it means for investors moving forward. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue » Cloud revenue growth to accelerate While Oracle saw its cloud infrastructure (OCI) revenue soar 52% year over year in its fiscal 2025 Q4 to $3 billion, what got investors excited was the company's forecast that its cloud infrastructure revenue would soar by more than 70% in fiscal 2026. Meanwhile, Oracle founder Larry Ellison boasted that the company will "build and operate more cloud infrastructure data centers than all of [its] cloud infrastructure competitors combined." The company pointed to its strong remaining performance obligations (RPO) as a reason for the confidence in its growth outlook, noting that most of these contracts are non-cancellable. In the quarter, RPO jumped 41% to a whopping $138 billion. It said cloud RPO climbed 56% and is now nearly 80% of its total RPO. More importantly, it is looking for about a third of the RPO to be recognized as revenue over the next year. Oracle said that demand for its OCI services continues to "dramatically" outpace supply, with consumption revenue soaring 62% year over year. As such, it plans to increase its capital expenditures (capex) to more than $25 billion in fiscal 2026 to help meet increasing demand. It said most of this spending will be on revenue-generating equipment that is going into data centers and not for land or buildings. The company also highlighted the strength of its cloud database services, which saw revenue climb 31% year over year, and its autonomous database, which saw consumption revenue surge 47%. It said that its database service being accessible across multiple cloud providers gives it a competitive advantage in the market. For its fiscal 2025 Q4 ended May 31, Oracle's overall revenue rose 11% year over year to $15.9 billion, which handily topped the $15.6 billion analyst consensus, as compiled by LSEG. Cloud revenue increased 27% year over year to $6.7 billion. Within the cloud segment, cloud infrastructure revenue surged 52% to $3 billion, as mentioned above, while cloud application revenue increased 12% to $3.7 billion. Adjusted earnings per share (EPS), meanwhile, rose 4% to $1.70. That topped the $1.64 analyst consensus. Looking ahead, Oracle forecasts fiscal 2026 revenue to increase by 16% in constant currency to more than $67 billion, with cloud revenue growing by more than 30% in constant currency. That's a big acceleration in growth from the 9% overall revenue increase in constant currency and the 24% cloud revenue growth it saw in 2025. Meanwhile, it's expecting its RPO to more than double on the year. For fiscal Q1, it guided for revenue to increase by between 12% to 14% and cloud revenue to climb by between 26% to 30%. Adjusted EPS is projected to rise by between 45% and 7%. Can the stock's momentum continue? While Oracle's OCI business still trails No. 3 player Google Cloud by a wide margin in terms of revenue, and it isn't spending nearly as much in capex as its larger cloud competitors, the company is nonetheless still making a lot of noise in the space. Its projected 70% OCI growth this fiscal year is much higher than its larger competitors, with Microsoft and Alphabet tending to have between low to mid-30% cloud computing revenue growth and Amazon in the high teens. The momentum in its cloud business, meanwhile, is helping accelerate the company's overall growth as well. With the company projecting mid-teen overall revenue growth this year, it is no longer a sleepy giant. It is looking to return to being a growth stock. From a valuation perspective, Oracle trades at a forward P/E of just under 30 based on 2026 fiscal-year analyst estimates, while its price/earnings-to-growth (PEG) ratio is below 0.4. A PEG ratio under 1 is typically viewed as undervalued. However, unlike most large-cap tech stocks, Oracle does carry a lot of debt. It ended its fiscal year with net debt of $81.4 billion. Meanwhile, it spent all of the operating cash flow it generated ($20.8 billion) on capex ($21.2 billion). This is one reason why it can't accelerate its data center infrastructure investments by much more than it already is spending. Balancing it all out, I think the shift from more of a value stock to a growth stock should help propel the stock higher, especially as Oracle becomes one of the best ways to play the trend in cloud computing. Throw in the potential of the Stargate project, which isn't off the ground yet, and the stock can really start to cook. Should you invest $1,000 in Oracle right now? Before you buy stock in Oracle, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Oracle wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $653,702!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $870,207!* Now, it's worth noting Stock Advisor 's total average return is988% — a market-crushing outperformance compared to172%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of June 9, 2025 John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, and Oracle. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Globe and Mail
37 minutes ago
- Globe and Mail
How segregated funds are evolving to meet investor preferences
After a few difficult years for segregated fund sales, there are signs of life in the space as product manufacturers adopt new tools to modernize their shelves. Seg funds in Canada saw net redemptions the past three years, and product development slowed as manufacturers awaited the Office of the Superintendent of Financial Institutions' (OSFI) new capital requirements. However, a report from Toronto-based Investor Economics, an ISS Market Intelligence business, shows that 25 new seg fund products launched in 2024, up from 15 in 2023. And the new capital requirements could allow insurers to hold more exchange-traded funds (ETFs) in their portfolios to meet liabilities. 'What's now coming very loudly from the insurance companies is that they want to modernize the shelf of products they offer … and for many of them modernizing [has] meant first looking at the potential to bring ETFs as underlying investments into fund policies,' says Carlos Cardone, managing director, Canada, with Investor Economics. As with the rest of the investment fund industry, insurers that issue seg funds are facing pressure to lower fees, leading some to adopt passive investing options, the Investor Economics report says. Of the 25 new seg funds launched in Canada last year, more than a quarter invested in underlying ETFs. One firm that has been integrating ETFs into seg funds is BMO Insurance, and lowering price points is one reason. Daniel Walsh, senior vice-president and head of individual insurance and annuities at BMO Insurance, says it's important for manufacturers to adopt ETFs and ensure that seg fund products 'continue to offer new and exciting investment options and not just yesterday's mutual funds.' Empire Life has added 16 seg funds to its lineup over the past year, including ETF-based choices that provide access to higher-growth, higher-risk areas of the market, such as the Nasdaq 100. It also became the first insurer to partner with Vanguard Investments Canada Inc. and use the fund giant's asset allocation ETFs in a seg fund wrapper. 'We deliver those at an extremely low price point for the segregated fund markets that allows customers to get that index experience in a nice set it, forget it [format],' says Geoff Gibson, vice-president, investment product and marketing, at Empire Life. The management expense ratios on the Empire Life Vanguard ETF Portfolio GIFs range from 1.17 per cent to 2.46 per cent, according to Investor Economics. Mr. Cardone says some companies are also exploring the integration of liquid alternatives into seg funds. The new capital requirements won't affect BMO Insurance's portfolio of products or guarantee choices, Mr. Walsh says. Its most popular structure remains a 75 per cent maturity guarantee and 100 per cent death benefit, but he says there's greater awareness that the 75 per cent/75 per cent option offers many of the same benefits at a more attractive price. Mr. Cardone says there's growing demand for income-generating products as more people retire after a pandemic pause. However, seg funds with guaranteed withdrawal benefits (GWBs), which seem tailor-made for income-seeking investors navigating volatile markets, are also the seg fund feature most constrained by OSFI's capital requirements. 'The potential variability of the capital and the lifetime guarantee on income – all of that is difficult to balance [with] the capital requirements and the costs associated with that,' Mr. Cardone says, adding that several insurance companies offering GWBs took a hit after the 2008 global financial crisis. At that point, products were redesigned and relaunched, and some firms abandoned GWBs altogether. Empire Life has stayed in the GWB market despite the challenges presented by the perfect storm of capital requirements, market volatility and trends in long-term interest rates. 'We're a big believer in the idea that Canadians, especially nowadays with not everybody having access to a defined-benefit pension plan, … are looking for guaranteed income solutions,' Mr. Gibson of Empire Life says. 'Clients and their financial advisors want that level of certainty.' He also says there's room to attract younger investors to seg funds. Empire Life launched a first home savings account (FHSA) in 2024 and plans to launch the seg fund industry's first registered disability savings plan (RDSP) this fall. It hopes that opening up access to the RDSP through insurance-licensed advisors will increase uptake of a notoriously underused planning strategy for people who qualify for the disability tax credit. Mr. Walsh says the predominant market for seg funds is still older investors who want to participate in the markets, protect their capital and take advantage of the speed and privacy of death benefit payouts. Mr. Gibson agrees, saying he continues to see a strong market for peace of mind. 'It's being able to get those payouts into the hands of the beneficiaries in a matter of weeks as opposed to 12 to 16 months when they go through the estate – that can be life-changing,' he says. For that reason, Mr. Walsh says he would like to see advisors play up the products' estate planning benefits, as many Canadians aren't as aware of them.
CBC
an hour ago
- CBC
Massive 19th-century Montreal building to be turned into housing
The province has owned the former Institute for the Deaf and Mute building for decades but has no longer found a use for it. It's now selling the building to a private company that plans to turn it into a giant housing complex.
