Oracle (NYSE:ORCL) Soars on Cloud Strength, AI Contracts, and Expanding Profit Margins

Oracle Corporation (NYSE:ORCL) Surges on Cloud Momentum and AI Infrastructure Strength

OCI Growth and the AI Cloud Supercycle Are Rewriting ORCL's Valuation Premise

Oracle Corporation (NYSE:ORCL) has cemented its position as one of the most surprising outperformers in the large-cap tech universe in 2025. While market attention has gravitated toward Nvidia and Microsoft, Oracle has quietly gained over 47% year-to-date, outpacing even the Nasdaq and pulling sharply ahead of Salesforce. This resurgence is not grounded in narrative alone but fueled by hard data: 11% year-over-year revenue growth in Q4 to $15.9 billion, driven primarily by Oracle Cloud Infrastructure (OCI), with the segment poised to expand over 70% in FY26. These aren't speculative claims—bookings have already entered Oracle's rapidly growing RPO, which management expects to double in fiscal 2026.

Backlog Acceleration and AI Infrastructure Contracts Redefine Long-Term Revenue Outlook

Oracle's remaining performance obligations (RPO) are no longer a trailing indicator—they've become a forward-looking lens into Oracle's multiyear growth trajectory. CEO Safra Catz highlighted on the earnings call that Oracle's OCI unit has seen massive non-cancelable bookings, tied to enterprise AI demand. In particular, the $30 billion Stargate contract linked to OpenAI adds credibility to Oracle’s role as a top-tier hyperscaler. The company has committed over $25 billion in capital expenditures to build data center capacity supporting this wave. With only 33% of RPO expected to be fulfilled in the next 12 months, Oracle has already begun shipping Nvidia GB200 racks to the Stargate I site, solidifying its technical role at the forefront of AI data infrastructure.

Oracle's Position in the Hyperscaler Race: Catching Up to AWS, Azure, and Google Cloud

The annualized revenue run rate for Oracle's cloud business is now nearing $12 billion, placing it closer to the tier-1 club. For context, Amazon AWS generates $117 billion annually, Microsoft Azure $107 billion, and Google Cloud $49 billion. Yet what differentiates Oracle is the profit mix. Cloud now makes up 43% of revenue—up more than five points year over year. This shift has allowed Oracle to post a 22% net margin, second only to Alphabet and Microsoft among peers. The rise in profitability, despite a temporary 67bps pullback in operating margins due to aggressive R&D and sales investment, suggests a longer-term capacity for upside surprise in EPS.

Agentic AI, Strategic SaaS, and the Database Edge

Oracle’s database dominance is being enhanced, not eroded, by AI. Its Autonomous Database and AI Data Platform are becoming the default choice for enterprises needing LLM-ready, secure infrastructure. Over 100 AI agents have been launched, embedded across Oracle’s SaaS stack—from back-office ERP to sales automation. This trifecta—database, cloud, and SaaS—is delivering synergistic value across OCI deployments. Notably, SaaS now runs at a $9.3 billion annualized pace and is growing at 20% annually. Oracle’s cross-sell model is deepening wallet share in ways that Salesforce, which lacks infrastructure, cannot replicate.

Oracle’s Insider Transactions and Capital Allocation Strategy

You can view Oracle’s full insider transaction activity here: ORCL Insider Transactions. Recent capital allocation trends show management aggressively reinvesting in infrastructure and AI tooling while balancing shareholder returns. Despite 12% opex growth, the company’s long-term leverage over fixed costs and expected margin rebound could support upward EPS revisions in FY26 and FY27. Oracle’s ability to simultaneously expand CAPEX and maintain strong margins is rare in an AI-fueled environment dominated by burn-heavy investment cycles.

Valuation Expansion: Still Room Despite 36x P/E

Oracle's P/E multiple has surged to 36x, placing it at a 40% premium to software peers. However, when profitability and growth are factored in, the PEG ratio compresses to just 2.73x—suggesting the premium is more justified than it appears. On a profitability-weighted basis, Oracle is trading at an 11% discount to peer median. Consensus estimates call for 16% revenue growth and 12% EPS growth in FY26, rising to 19% and 21% in FY27. By comparison, Microsoft’s projected FY26 EPS growth is just 13%.

AI Exhaustion or Contrarian Opportunity?

Some investors argue that the AI-fueled rally is already priced in. But Oracle’s current price levels don’t fully reflect the profitability leverage of its $30 billion OpenAI contract, nor the full monetization cycle of its hybrid cloud positioning. The reality is that Oracle is the only hyperscaler with full-stack infrastructure, an enterprise-grade database optimized for AI, and vertically integrated SaaS—all under one umbrella. As investors rotate focus from speculative AI multiples to realized profit, Oracle’s fundamentals are likely to receive stronger valuation credit.

Debt, CapEx Risk, and Trade Policy Overhang

Oracle’s debt remains elevated relative to sector averages, and the $25B in FY26 CAPEX may pressure free cash flow. Additionally, unresolved U.S.-China tariff tensions and AI export regulations could impair long-term sovereign contracts. These are real risks—but not dealbreakers when weighed against $138 billion in backlog and over 40% projected cloud revenue growth next year.

Final Verdict on NYSE:ORCL

Despite valuation expansion, Oracle Corporation (NYSE:ORCL) is delivering against aggressive growth expectations and remains firmly positioned as a long-term AI and cloud infrastructure compounder. The profitability factor is increasingly priced into institutional models, but the stock still has up to 11% upside, supported by a resilient operating model and visibility into multi-year contracts. ORCL is a BUY.

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