While Alphabet and Microsoft dominate cloud computing discussions, Oracle is emerging as a significant player, particularly in AI infrastructure. Oracle’s cloud business is experiencing rapid growth, with revenue soaring 121% in its latest quarter. The company’s unique advantage lies in integrating its established database expertise with cloud services, allowing businesses to incorporate AI without overhauling existing systems.
Oracle’s strategy also includes a multicloud approach, meeting customers on platforms like AWS, Azure, and Google Cloud. Combined with its recurring revenue from enterprise applications, this positions Oracle for multiple growth avenues. Despite significant investment in data centers impacting free cash flow, analysts largely recommend Oracle stock as a strong buy, seeing potential for substantial upside.
When investors think about cloud computing, Alphabet (GOOGL, GOOG) and Microsoft (MSFT) are often the first names that come to mind. But Oracle (ORCL) is also making a strong push into AI infrastructure, and its rapidly growing cloud business offers another way to ride the AI boom.
With $5,000 to put to work today, investors may find Oracle a more compelling cloud choice than either of those giants. The reason starts with how fast its cloud business is growing.
Image source: Getty Images.
This database giant is becoming a major force in AI cloud
Oracle may be best known for its database software, which businesses use to store and manage critical information. These days, that established business is laying the foundation for a much bigger opportunity: supplying the cloud infrastructure that other companies need to develop and run AI models.
Oracle's cloud infrastructure business is already seeing solid growth, with revenue climbing 121% to $7.4 billion in its most recent quarter. That suggests its cloud business is becoming an important growth engine rather than simply an extension of its traditional software business.
Market capMarket cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary.$387.73B
Day's range$127.36 - $133.80
52wk range$114.50 - $289.24
Volume36.1M
Avg volume30.5M
Gross margin61.93%
Dividend yield1.56%
Its massive backlog, meanwhile, provides a longer runway for growth. Oracle's remaining performance obligations (RPO) reached a record $664 billion, up $209 billion year over year. RPO represents contracted revenue that has not yet been recognized, giving investors a clearer view of the company's future revenue.
That means Oracle is seeing surging demand from customers that need cloud capacity for AI training, applications, and inference. Still, that demand isn't limited to one type of customer, and Oracle is positioning itself to capture several parts of that market.
But with competition picking up, the next question is how Oracle is setting itself apart from the biggest names in the cloud business.
Oracle has a different advantage from its larger cloud rivals
Microsoft Azure and Alphabet's Google Cloud compete across broad cloud ecosystems. However, Oracle's opportunity is somewhat different: it has the luxury of combining its established database business with cloud infrastructure designed for demanding enterprise workflows.
That matters because companies wouldn't want to rebuild their IT systems every time a new AI model arrives. Oracle's database expertise helps here, allowing companies to integrate AI into the systems and data they already rely on without disrupting operations.
Its multicloud strategy also allows customers to access Oracle database services through major cloud platforms, including Amazon Web Services, Microsoft Azure, and Google Cloud. Instead of requiring customers to migrate everything to Oracle's cloud, it can meet businesses where their existing systems reside.
On top of that, Oracle's established software business provides a source of recurring revenue. Its cloud applications include enterprise resource planning, human resources, and supply chain tools that businesses use to run their daily operations.
That combination of AI-driven growth and recurring software revenue gives the company multiple avenues to expand, which only strengthens the bull case for Oracle.
Still, even a strong bull case needs a reasonable price point and manageable risks.
Is Oracle stock a buy after its recent pullback?
A consensus rating for Oracle among 42 analysts is a strong buy, with target prices indicating between 87% (average) and 206% (highest) upside over the next 12 months. Plus, at about 20 times earnings, Oracle doesn't look too expensive, especially considering its rapid cloud growth.
That said, Oracle is spending heavily to build the data centers needed to serve its customers. And that investment is already weighing on its free cash flow, which means Oracle is spending more than its operations generate. Overspending is a real risk, as the concern is whether Oracle can convert its customer commitments into sufficient revenue to deliver a decent return on those investments.
Looking ahead, if Oracle can turn its massive backlog into lasting profits, today's pullback could be an attractive entry point for long-term investors.
Oracle may not get the same attention as Alphabet or Microsoft, but its growing cloud business and expansion into AI make it worth a closer look. With $5,000, investors can gain meaningful exposure to that opportunity.
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