Cloud Revenue Surge Sets 70% Growth Trajectory for Oracle Stock (ORCL)
Oracle's (ORCL) cloud business is growing at an impressive—and somewhat underappreciated—pace. The company reported strong fiscal Q4 2025 results, pushing its stock to all-time highs.
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At the core of the performance was Oracle Cloud Infrastructure (OCI), which grew 52% year-over-year to $3 billion. Notably, Oracle raised its FY2026 guidance, projecting OCI growth to accelerate beyond 70%, up from 50% in FY2025. This confidence is backed by a record $138 billion in Remaining Performance Obligations (RPO), signaling robust demand ahead.
What stands out is that Oracle isn't merely riding the broader wave of cloud adoption—it's actively gaining ground in a highly competitive market. Despite the stock's recent rally, Oracle's expanding footprint and growing leadership in cloud infrastructure continue to support a bullish long-term outlook.
Strategic Alliances Powering AI Infrastructure
Strategic partnerships have played a critical role in Oracle's cloud surge, particularly its collaborations with OpenAI and Microsoft (MSFT). In June 2024, OpenAI—the creator of ChatGPT—chose Oracle Cloud Infrastructure (OCI) to help support capacity needs for Microsoft's Azure AI platform. Given the overwhelming demand for AI compute, Microsoft alone couldn't meet OpenAI's requirements, positioning Oracle as a complementary partner rather than a direct competitor. The arrangement benefits all parties and underscores OCI's growing relevance in the AI ecosystem.
Oracle's role extends further through its founding stake in Stargate LLC, a joint AI venture with OpenAI, SoftBank, and MGX. The initiative plans to invest up to $500 billion in U.S.-based AI infrastructure, with a significant portion designated exclusively for OpenAI. This deepens Oracle's long-term integration into the AI supply chain.
Importantly, this isn't a short-term arrangement. Oracle has entered a 15-year lease to provide compute capacity to OpenAI and committed around $40 billion to acquire Nvidia's GB200 GPUs. To meet surging demand, Oracle also plans to triple its cloud infrastructure capacity by the end of fiscal 2026. While this requires substantial capital investment, Oracle's strong cash flow positions it in a solid financial position to fund its expansion without compromising its stability.
Notably, Oracle's cloud growth appears to be significantly outpacing its peers. OCI's 52% year-over-year growth bested Amazon Web Services (19%), Google Cloud (30%), and Microsoft Azure (20%). Notably, Oracle's global cloud market share was just 3% in Q1 2025, compared to AWS's 29%. Therefore, there is ample room for growth.
OCI's Competitive Edge in a Growing Market
Compared to other cloud providers, Oracle Cloud Infrastructure (OCI) stands out for its consistent and transparent pricing model across regions, as well as its flexibility in handling high-performance workloads. A particularly notable aspect of Oracle's strategy is its approach to 'co-opetition'—collaborating with competitors to mutual advantage.
This is evident not only in its partnerships, such as with Microsoft and OpenAI, but also in its product offerings. For example, Oracle Interconnect for Azure enables private, low-latency connections between OCI and Microsoft Azure, with no data transfer fees, highlighting Oracle's commitment to interoperability and customer-centric solutions.
ORCL Navigates the Risks and Challenges Ahead
While Oracle's recent momentum is impressive, several challenges lie ahead. One key risk is the ability to scale hardware and data center capacity quickly enough to meet growing demand; any delays or supply chain disruptions could lead to customer churn. Additionally, the significant capital expenditures required to expand OCI may place near-term pressure on margins.
It's also important to recognize that the cloud infrastructure market remains highly competitive. Despite its recent gains, OCI still holds a relatively small share compared to the dominant hyperscalers, who continue to invest heavily in AI infrastructure. Sustaining competitive pricing and meaningful product differentiation over the long term will require continued innovation and operational excellence.
Is ORCL Stock a Buy, Sell, or Hold?
On Wall Street, ORCL earns a consensus Moderate Buy rating based on 20 Buy, 13 Hold, and zero Sell ratings in the past three months. ORCL's average stock price target of $206.71 implies a downside potential of ~2.5%.
Notably, the consensus price target is still adjusting to a flurry of analyst upgrades. For instance, analyst Keith Bachman of BMO Capital increased his price target from $200 to $235 following Oracle's earnings report. The analyst noted that 'While Oracle's fiscal 2026 remaining performance obligation guidance 'seems aggressive,' even if the company is close to guidance, the shares will move higher.'
Oracle Emerges as AI Contender with Partnerships and Cloud Growth
Oracle has made a notable pivot toward AI, driven by strategic partnerships, most notably its collaborations with OpenAI and Microsoft. Management's upbeat fiscal 2026 revenue guidance, coupled with record-high Remaining Performance Obligations (RPO), signals strong growth momentum. Over the long term, scaling its differentiated cloud infrastructure positions Oracle to capitalize on significant opportunities in a rapidly expanding market.
While near-term headwinds such as elevated capital expenditures and intense competition from larger hyperscalers remain, Oracle's strong Q4 FY25 results, accelerating OCI growth outlook, and deepening AI alliances make ORCL an increasingly compelling play in the AI infrastructure space.
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