Oracle’s high valuation looks justified as the market sees a new leader in AI infrastructure

Concerns over Oracle’s lofty valuation have faded – the company has demonstrated to investors a large-scale and sustainable source of future revenue.

Oracle reported Q1 FY2026 revenue of 14.93 billion USD (+12% year-on-year), with cloud operations emerging as the primary growth driver: total cloud revenue rose 28% year-on-year to 7.19 billion USD. Non-GAAP earnings per share reached 1.47 USD (+6% year-on-year), while operating margin stood at 42%, underlining the company’s efficiency, particularly in the fast-growing cloud segment. Although revenue came in slightly below consensus forecasts, Oracle surprised the market with the scale of its contract backlog: Remaining Performance Obligations (RPO) surged 359% year-on-year to 455 billion USD, with management expecting further growth beyond 500 billion USD in the coming months. The company also raised its full-year guidance for cloud infrastructure, projecting growth of 77% by the end of FY2026 and setting a target of 144 billion USD by FY2030, reinforcing confidence in its long-term growth trajectory.

Oracle sent a powerful signal to investors by shifting its focus from quarterly results to the long-term contract cycle in AI cloud, sparking a historic 36% jump in the share price. As a result, CEO Larry Ellison briefly became the world’s richest person. This was followed by a wave of analyst upgrades, lifting target prices for ORCL shares to the 360–400 USD range. Additional momentum came from reports of Oracle’s potential participation in a consortium around TikTok.

Ultimately, the market reassessed Oracle as one of the few major players with proven demand for AI cloud and investors’ willingness to pay higher multiples for long-term growth. Risks remain in the form of record capital investment (CapEx of around 35 billion USD) and negative TTM free cash flow. Still, market participants view these as temporary and likely to be offset by future cash generation.

This article examines Oracle Corporation, outlines its business model, and provides a fundamental analysis of Oracle’s results. It also includes a technical analysis of Oracle Corporation shares, based on their current dynamics, forming the basis for an ORCL stock forecast for 2025.

About Oracle Corporation

Oracle Corporation is an American technology company founded in 1977 by Larry Ellison, Bob Miner, and Ed Oates under the original name Software Development Laboratories. Initially, the headquarters were in Austin, Texas. After rebranding to Oracle in 1982, the company specialised in software development and cloud technologies, including database management systems (DBMS), enterprise software, cloud solutions, and infrastructure. The company is renowned for its flagship product, Oracle Database, and is also actively expanding its cloud services (Oracle Cloud), competing with AWS, Google Cloud, and Microsoft Azure.

Oracle went public on 12 March 1986 on the NASDAQ under the ticker symbol ORCL, becoming one of the first technology companies to list on the public market. Today, Oracle is one of the most prominent players in the enterprise technology industry, focusing on business digitalisation and cloud innovations.

Oracle Corporation’s primary sources of revenue

Oracle’s primary sources of revenue are derived from the following business segments:

• Cloud Services and License: this is the largest revenue source, accounting for approximately 86% of total revenue. Oracle provides licences for its software products, such as Java, Oracle Applications, Oracle Database, Oracle Middleware, and others. This segment also includes cloud computing via the Oracle Cloud platform, encompassing IaaS (Infrastructure as a Service), PaaS (Platform as a Service), and SaaS (Software as a Service) models
• Hardware: approximately 5% of revenue comes from the sale of hardware, including servers, storage systems, and specialised equipment. Production is outsourced to contract partners, with revenue further supplemented by software related to the hardware
• Services: approximately 9% of revenue is generated from technical support and consulting services. This includes user support for Oracle software, updates, training, and assistance with solution integration. This segment is crucial for customer retention and ensuring stable financial inflows

Oracle Corporation Q3 FY2025 results

On 10 March, Oracle Corporation published its Q3 2025 financial results for the period ending 28 February 2025. Below are the key figures:

• Revenue: 14.13 billion USD (+6%)
• Net profit: 4.23 billion USD (+6%)
• Earnings per share: 1.47 USD (+4%)
• Operating margin: 44.00% (unchanged)

Revenue by segment:

• Cloud services and licence support: 11.00 billion USD (+10%)
• Cloud revenue (IaaS plus SaaS): 6.20 billion USD (+23%)
• Cloud licence and on-premises licence: 1.12 billion USD (-10%)
• Hardware: 703.00 million USD (-7%) Services: 1.29 billion USD (-1%)

Oracle’s results for Q3 2025 present a mixed picture, reflecting both achievements and challenges.

Overall revenue of 14.10 billion USD fell short of the 14.40 billion USD forecasted by analysts, indicating difficulties in meeting market expectations. Adjusted earnings per share amounted to 1.47 USD, below the expected 1.49 USD, signalling a decline in profitability. Furthermore, while revenue from Cloud services and licence support grew by 10%, it did not reach the anticipated 11.20 billion USD, indicating challenges with the full-scale monetisation of the cloud market.

On a positive note, the company entered into strategic partnerships with OpenAI, Meta Platforms (NASDAQ: META), and NVIDIA (NASDAQ: NVDA), which, according to CEO Safra Catz, is expected to drive a 15% revenue increase in the 2026 financial year that starts in June of this year. In addition, Oracle plans to double its data centre capacity over the year to meet the growing demand for cloud services. Oracle has also invested in the Stargate project, which aims to develop cloud and network infrastructure for scalable computing and AI applications. For Oracle’s shareholders, the pleasant news was the announcement of a 25% increase in quarterly dividends, raising them to 0.50 USD per share.

Oracle Corporation Q4 FY2025 results

On 11 June, Oracle Corporation released its report for Q4 fiscal 2025, which ended on 31 May. Its key highlights are provided below:

• Revenue: 15.90 billion USD (+11%)
• Net income: 3.42 billion USD (+9%)
• Earnings per share: 1.70 USD (+4%)
• Operating margin: 44.00% (-300 basis points)

Revenue by segment:

• Cloud services and license support: 11.70 billion USD (+14%)
  • Cloud Revenue (IaaS plus SaaS): 6.70 billion USD (+27%)
• Cloud license and on-premises license: 2.01 billion USD (+9%)
• Hardware: 8500 million USD (-2%)
• Services: 1.35 billion USD (%)

Oracle Corporation’s Q4 fiscal 2025 report demonstrated the company’s accelerating shift towards a cloud-centric business model. Total revenue rose by 11% year-on-year to 15.9 billion USD, with adjusted EPS reaching 1.70 USD, beating analysts’ expectations. Oracle Cloud Infrastructure (OCI) revenue growth of 52% to 3 billion USD was particularly notable, which made this segment the company’s key growth driver.

Management emphasised the strength of Remaining Performance Obligations (RPO), which rose by 41% to 138 billion USD. CFO Safra Catz noted that this figure could more than double in fiscal 2026, providing strong visibility into future revenues. According to the company’s guidance, the cloud segment is expected to accelerate significantly next year, with total cloud revenue projected to rise by over 40% and OCI revenue by more than 70%.

Chairman of the Board and Chief Technology Officer Larry Ellison announced an aggressive expansion of Oracle’s global data centre network, including hundreds of new deployments across its Multi-Cloud and Cloud@Customer platforms. These initiatives, backed by a 25 billion USD investment program, strengthened Oracle’s position in the competitive landscape against major providers such as Amazon Web Services, Microsoft Azure, and Google Cloud. Additionally, the company is actively involved in generative AI initiatives, including providing infrastructure support for AI startups and potential involvement in projects such as the spin-off of TikTok in the US.

The company’s shares gained 14% following the report’s release, which reflected growing investor confidence. Oracle is successfully transitioning from a traditional licensing model to one based on recurring cloud revenues. Nevertheless, investors should consider the company’s high debt burden and relatively elevated valuation multiples compared to competitors.

For fiscal 2026, the company forecasted revenue of at least 67 billion USD, which corresponds to annual growth of 16-17%. Alongside RPO growth and sustained demand for OCI, this forecast created the foundation for continued positive momentum. Thus, Oracle consolidated its status as a serious player in the enterprise cloud infrastructure market, and its strategic investments appeared capable of delivering long-term returns for shareholders.

Oracle Corporation Q1 FY2026 results

On 9 September, Oracle Corporation released its report for Q1 FY2026, which ended on 31 August. The key figures are as follows:

• Revenue: 14.93 billion USD (+12% year-on-year)
• Net income (non-GAAP): 4.28 billion USD (+8% year-on-year)
• Earnings per share (non-GAAP): 1.47 USD (+6% year-on-year)
• Operating margin: 42.00% (-100 bps)

Revenue by segment:

• Cloud: 7.19 billion USD (+28% year-on-year)
• Software: 5.72 billion USD (-1% year-on-year)
• Hardware: 670 million USD (+2% year-on-year)
• Services: 1.35 billion USD (+7% year-on-year)

Oracle maintained the guidance issued following its Q4 FY2025 report and delivered strong results in Q1 FY2026. Growth was driven primarily by cloud operations, particularly Oracle Cloud Infrastructure (OCI). Although revenue came in slightly below analyst forecasts, the report was received positively by the market, primarily due to the sharp increase in the contract backlog, which underpins future revenues. Total revenue stood at 14.93 billion USD, up 12% year-on-year but down 6% compared with the prior quarter. Non-GAAP operating profit rose to 6.24 billion USD, while net income reached 4.28 billion USD. GAAP EPS was 1.01 USD (down 2%), while non-GAAP EPS came in at 1.47 USD (+6%). Although just below expectations, a major positive was the surge in Remaining Performance Obligations (RPO) to 455 billion USD, up 359% from the previous year.

The revenue mix shifted further towards cloud. The cloud segment contributed 7.19 billion USD (+28% year-on-year), now accounting for nearly half of total company revenue. Software revenue declined to 5.72 billion USD, while Hardware rose to 670 million USD and Services to 1.35 billion USD.

Capital returns to shareholders remain limited. In the quarter, Oracle repurchased about 0.4 million shares worth 93 million USD and declared its regular quarterly dividend of 0.50 USD per share, payable in October. Despite robust operating cash flow over the past twelve months (21.5 billion USD), the company is currently spending more than it generates: free cash flow over the same period was –5.88 billion USD. This reflects record investment in data centres, as Oracle rapidly expands capacity for cloud and AI workloads. For FY2026, the company plans to spend approximately 35 billion USD on building out such infrastructure.

Management expects the cloud business to accelerate. In Q2 FY2026, Oracle forecasts total revenue growth of 12–14% in constant currency and EPS in the range of 1.61–1.65 USD. Cloud revenue is projected to rise by more than 30%. The company raised guidance for OCI separately: growth of 77% year-on-year is expected, to 18 billion USD, with a long-term target of 144 billion USD by FY2030. Oracle also reported large-scale collaborations with major cloud providers (Microsoft Azure, AWS and Google Cloud) and the construction of 71 joint data centres, 37 of which are already in the launch phase. Database revenue in the multi-cloud environment increased more than fifteenfold year-on-year. Among Oracle’s key partners are OpenAI, xAI, Meta, NVIDIA and AMD, all of which are actively using OCI for AI workloads.

Reasons for the sharp rise in ORCL shares

Oracle’s share price jumped more than 35% following the release of its results. This was driven less by the quarterly figures themselves and more by strong expectations for the future. The key factor was the sharp increase in booked contracts: RPO surged to 455 billion USD, 4.6 times higher than a year earlier. Management expects this figure to exceed 500 billion USD in the near term, supported by several new multi-billion-dollar contracts. This points to exceptionally strong demand for Oracle’s cloud capacity in the coming years.

The company also upgraded its outlook for the cloud business (OCI), forecasting 77% growth this year and targeting 144 billion USD by FY2030. This underscores the growing shift in revenue towards cloud, a high-margin segment. While quarterly revenue and profit were broadly in line with analyst expectations, the market is betting on an acceleration of growth ahead.

Another important factor is the development of the multi-cloud strategy. Oracle is expanding its partnerships with Amazon (AWS), Microsoft (Azure) and Google Cloud, with revenue from such solutions rising more than fifteen-fold year-on-year. The company is building an additional 37 joint data centres with major cloud providers, bringing the total to 71. This reduces the risk of reliance on a single supplier and demonstrates that leading technology companies are actively using Oracle solutions for AI workloads.

In the past quarter, Oracle secured four major contracts, each valued in the billions of dollars. Against this backdrop, cloud infrastructure revenue rose 55% year-on-year, while total cloud revenue (including SaaS) grew 28% year-on-year.

Equity analysts also responded positively: major investment firms raised their target prices for Oracle shares to the 340–400 USD range, further boosting investor interest and demand for the stock.

As a result, market participants have started to view Oracle as one of the key players in the long-term growth cycle of AI infrastructure. A strong contract portfolio, upgraded forecasts, and the expansion of multi-cloud solutions formed the basis for a re-rating of the business, even though the quarter itself delivered fairly ordinary revenue and profit figures.

Fundamental analysis of Oracle Corporation

Below is the fundamental analysis of ORCL following the Q1 FY2026 results:

• Cash flow and resilience: in Q1 FY2026, operating cash flow was 8.14 billion USD, while capital expenditure totalled 8.50 billion USD, resulting in negative free cash flow of 362 million USD

Over the past twelve months, the company generated 21.53 billion USD in operating cash flow against CapEx of 27.41 billion USD, leading to a cumulative negative FCF of 5.88 billion USD

A strong support remains the Remaining Performance Obligations (RPO) portfolio of 455.3 billion USD, with a predictable revenue recognition schedule providing high visibility of future inflows

• Balance sheet and debt load: at quarter-end, cash and short-term investments stood at 11.00 billion USD

Total debt amounted to 91.30 billion USD (9.08 billion USD current, 82.24 billion USD long-term). After accounting for cash reserves, net debt is estimated at around 80.30 billion USD

Quarterly interest expenses reached 923 million USD; on an annualised basis, compared with operating profit, coverage remains comfortable but not excessive (around 4.7× EBIT)

• Sources of growth financing: the primary source remains operating cash flow, with a significant portion of investment postponed to future periods

The company actively raises debt and uses leasing to finance infrastructure

Additional inflows come from employee programs (1.17 billion USD in Q1) and the sale of financed customer contracts (756 million USD in the quarter)

Oracle, at this stage, demonstrates that it can grow, particularly in the cloud, with strong operating profit and revenue performance. It has a robust RPO portfolio, solid operating cash flow and an adequate liquidity buffer. However, financial resilience is not ideal in the short term – high CapEx and negative FCF create pressure, although such a situation is common among companies investing heavily for future growth.

In this context, Oracle’s success depends on its ability to efficiently convert contracts into revenue and cash flow, while maintaining cost control and managing debt. Crucially, large customers must not cut back on AI investment.

Expert forecasts for Oracle Corporation stock for 2025

• Barchart: 26 of 37 analysts rated Oracle Corporation shares as Strong Buy, 1 as Buy, and 10 as Hold. The upper price target is 400 USD, with the lower bound at 195 USD
• MarketBeat: 26 of 35 analysts assigned a Buy rating, while 9 recommended Hold. The upper price target is 410 USD, and the lower bound is 130 USD
• TipRanks: 25 of 33 analysts advised Buy, and 8 recommended Hold. The upper price target is 410 USD, with the lower bound at 195 USD
• Stock Analysis: 10 of 29 experts rated Oracle shares as Strong Buy, 12 as Buy, and 7 as Hold. The top-end forecast is 410 USD, while the lower end is 167 USD

Oracle Corporation stock price forecast for 2025

From April to September 2025, ORCL shares surged by 193%. In just the past three weeks, the stock gained 120 USD, equivalent to a 57% rise. Against this backdrop, all key resistance levels were broken, with a new all-time high recorded at 346 USD. Given such a sharp rally, the probability of a correction before a potential resumption of the upward trend has increased. Based on the current dynamics of Oracle’s share price, the two possible forecast scenarios for 2025 are as follows:

• Base forecast for Oracle Corporation shares: this scenario assumes a test of support at 280 USD, followed by a rebound and a move higher towards the historical high at 346 USD. If this resistance level is breached, the share price could climb to 400 USD
• Alternative forecast for Oracle Corporation stock: this scenario assumes a deeper pullback towards support around 260 USD. Given the company’s optimistic outlook for the coming years, market participants may view this level as attractive for new purchases. If the shares rebound from support, the ORCL price could resume its upward move, with the first upside target towards resistance at 346 USD

Risks of investing in Oracle Corporation stock

Investing in Oracle Corporation’s shares is associated with several risks that could negatively affect the company’s revenues and impact its investors. Below are the main risks:

Open Account

• Intense competition in cloud computing: Oracle faces fierce competition from giants such as Alphabet Inc. (NASDAQ: GOOG), Amazon.com, Inc. (NASDAQ: AMZN), and Microsoft Corporation (NASDAQ: MSFT), which dominate the cloud technology market. If Oracle fails to implement innovations fully and offer competitive pricing, it may lose market share, reducing its revenues
• Declining demand for outdated software: a significant portion of Oracle’s revenue comes from licences for on-premises software. As companies increasingly move to cloud-based solutions, the demand for traditional applications may decline. If Oracle does not ensure a transition of these clients to its cloud products in the near future, its revenue may shrink
• Customer retention issues: Oracle has been criticised for its aggressive sales tactics and complex licensing agreements, which may cause customer dissatisfaction. If this results in customer attrition, recurring revenue from support and subscriptions could decline
• Economic downturns: Oracle’s business model is oriented towards enterprises and depends on corporate IT budgets. During recessions or economic slowdowns, companies may delay or cut back on spending for software, cloud services, or hardware upgrades, which would directly affect Oracle’s revenues
• Limited infrastructure scalability: with rapidly growing demand for cloud services, particularly from AI-related projects, Oracle may face a shortage of computing capacity. Despite the announced data centre expansion plans and significant capital investment, the process of ramping up infrastructure takes time and resources. This may delay the execution of contracts and revenue recognition and even lead to client attrition to competitors with more scalable architectures. As a result, short-term revenue growth may be limited despite strong demand.