Oracle (ORCL) is Now a BIG Player in AI With a HUGE Backlog of Business Coming

Stock (Symbol)

Oracle (ORCL)

Stock Price

$302

Sector

Data is as of

Expected to Report

Company Description

Oracle Corporation offers integrated suites of applications plus secure, autonomous infrastructure in the Oracle Cloud. The Company’s segments include cloud and license, hardware, and services.

The cloud and license segment markets, sells and delivers a broad spectrum of enterprise applications and infrastructure technologies through its cloud and license offerings.

The hardware segment provides a broad selection of enterprise hardware products and hardware-related software products including Oracle Engineered Systems, servers, storage, operating systems, virtualization, management and other hardware-related software and related hardware support.

The services segment helps customers and partners maximize the performance of their investments in Oracle applications and infrastructure technologies. Its products and services are delivered worldwide through a variety of flexible and interoperable IT deployment models. These models include on-premise, cloud-based and hybrid deployments. Source: Refinitiv

Sharek’s Take

In last qtr’s earnings call, Oracle (ORCL) management bragged Oracle (ORCL) is becoming the go-to place for AI.

Founded in 1977 and incorporated in 2005, Oracle is the world’s second-largest enterprise software company, known for its strong position in databases and cloud infrastructure. Oracle provides products and services that address enterprise information technology (IT) needs. It also offers professional services to assist its customers in technical tasks. Arificial Intelligence (AI) has two processes:

1. AI Training is teaching the computer by feeding it large amounts of data to identify patterns.
2. AI Inferencing is using that knowledge to make decisions on new data.

ORCL managment has stated AI Inferencing will much, much larger than AI Training, as Inferencing will be used to run robotic factories, robotic cars, robotic greenhouses, biomolecular simulations for drug design, and much more.

ORCL’s business segments are:

• Cloud Services and License Support; +28% revenue growth last qtr, 48% of total revenue.
  • This segment provides subscriptions to cloud-based services and technical support for software licenses.
• Services; 7% revenue growth, 9% of total revenue.
  • Services focuses on consulting, training , and professional services that support Oracle’s technology.
• Cloud License and On-Premise License; -1% revenue growth, 38% of total revenue.
  • Includes one-time software license sales and updates, catering to both cloud and on-premise environments.
• Hardware; 2% revenue growth, 4% of total revenue.
  • Offers systems products, including servers and storage solutions, supporting enterprise IT infrastructure.

Oracle is now expected to have reveneue surge over the next 3-5 years. ORCL did $57 billion in revenue last year. It’s now expected to do $199 billion a year by 2029. But the company is spending big to build infrastructure to support these added revenue. Cap Ex for this fiscal year is expected to be $35 billion. Looking ahead, analysts have an Estimated Long-Term Growth Rate of 19% on the stock. The P/E of 44 is high, but may be deserved due to the potential ahead. In Fiscal 25, management repurchased a total of $600 million of shares and paid out dividends of $4.7 billion. The Board of Directors again declared a quarterly dividend of $0.50 per share. ORCL also has a dividend yield of 1%. ORCL stock was added to the Conservative Growth Portfolio earlier this year. I will now add it to the Growth Portfolio too.

One Year Chart

ORCL has a P/E of 44 this qtr, which is around where I think it should be. My Fair Value is P/E of 42. More on this later.

Notice the Est. LTG is 19%, up from 16% 2QtrsAgo. That’s a pretty good figure for a conservative stock like this.

Quarterly profit growth is weak right now. So the stock has been rising on expectations of better growth ahead.

Earnings Table

• MultiCloud database revenue from Amazon, Google and Microsoft grew 1529% last qtr.
• Management expects MultiCloud revenue to grow substantially every quarter for several years as it adds 37 datacenters to its three Hyperscale patners, for a total of 71.
• Cloud Infrastructure revenue grew 55%, as demand for GPU training and AI inferencing far outpaced supply. 
• Oracle Cloud Infrastructure (OCI) demand continues to dramatically outstrip supply.

Annual Profit Estimates are mixed this qtr. 

Qtrly Profit Estimates are for 11%, 17%, 18%, and 18% growth in the next 4 qtrs. Analyst think revenue will grow 15% next quarter.

Fair Value

Notice this stock used to have a P/E between 13 and 18. This quarter the P/E is 44.

My Fair Value is a P/E of 42, which equates to $286 a share. Although the stock doesn’t have “upside” right now, I feel I need to buy in as this company will be growing rapidly soon and I need to be invested.

ORCL has a May 31 Fiscal Year end. I’m calling this current year 2025 because it has 7 months in it. Management calls this year Fiscal 2026.

Bottom Line

Oracle (ORCL) has been a strong performer over the last decade, with consistent revenue growth, particularly from its cloud services and AI initiatives. 

ORCL stock has surged higher on cloud revenue news. But a lot of that news is now priced into the stock. Still, I feel ORCL is a must own for growth stock investors as there’s great growth ahead.

ORCL will be added to the Growth Portfolio and rank 17th in the Power Rankings to start. I just want to get a position here in this portfolio and might add to it later.

The stock moves up from 7th to 2nd in the Conservative Growth Portfolio Power Rankings.

Power Rankings

17 of 32

Aggressive Growth Portfolio

N/A

Conservative Stock Portfolio

2 of 19