Oracle Sees Major Growth Amid AI Boom

Redwood City, California – Oracle Corporation is emerging as an unlikely success story in the artificial intelligence landscape. The 48-year-old database software giant is experiencing renewed growth, signaling a shift in demand for AI computing.

As of May, Oracle reported remaining performance obligations of $138 billion, marking an increase of $40 billion from the previous year. This surge highlights the intense interest in Oracle’s cloud services, which aim to compete with major players like Amazon, Microsoft, and Google.

Oracle’s stock price has also doubled in the past two years, leading to a market capitalization of around $650 billion. Recently, Oracle’s price-to-forward earnings ratio surpassed Microsoft’s for the first time in 12 years, signaling investor confidence. Analysts are optimistic, with two-thirds currently rating Oracle’s stock as a buy.

The company has faced immense pressure due to its rapid growth and the significant sales potential from a newly announced cloud service agreement projected to generate $30 billion annually beginning in Oracle’s 2028 fiscal year. This deal, part of the Stargate project with OpenAI and SoftBank, could drastically reshape Oracle’s financial landscape.

However, challenges remain as Oracle navigates this volatile business environment. Securing AI chips from Nvidia, which are in high demand, is critical to their strategy. In the latest fiscal year, Oracle invested a record $21.2 billion in capital expenditures, resulting in its first negative annual free cash flow since 1990.

Despite these challenges, Oracle is not solely reliant on AI contracts for growth. Its public cloud services, known as OCI, are benefiting from increased corporate demand. Recent surveys indicate that 27% of chief information officers plan to increase spending on OCI, a rise from 18% six months ago. This trend offers a more stable foundation for Oracle amidst uncertain conditions in the enterprise software market.

Brent Bracelin from Piper Sandler recently upgraded Oracle to a buy rating, highlighting the company’s resilience and adaptability. While the high valuation carries risks, Oracle’s progress suggests it is overcoming skepticism in the market.