Safra Catz, CEO of Oracle, at a dinner hosted by President Donald Trump with tech leaders last week.
AFP via Getty Images
Oracle shares have soared 99% since the beginning of 2025 – with more than half of that gain coming in pre-market trading on Wednesday.
Why did this happen? After all, the Austin-based tech company announced results for the first quarter of its fiscal year 2026 that fell short of expectations. What sent Oracle stock soaring another 54 percentage points was the company’s outlook for the future of its cloud infrastructure business, according to CNBC.
The future didn’t take long: The Wall Street Journal reported Wednesday afternoon that Oracle and Open AI agreed to “one of the largest cloud contracts ever signed,” worth a reported $300 billion over five years.
Will Oracle stock keep rising? The answer depends on whether the tech giant can beat investor expectations and raise guidance in future quarters. I think there is more upside to the stock for two reasons:
- Oracle’s four-year forecast of eight-fold growth.
- Wall Street enthusiasm for Oracle’s results.
However, over the longer-term, Oracle stock may plunge if companies stop investing so heavily in artificial intelligence. That could happen unless more of them reap economic benefits – such as faster revenue growth and considerable boosts in productivity.
Oracle envisions very fast growth in its cloud infrastructure business. “We expect Oracle Cloud Infrastructure revenue to grow 77% to $18 billion this fiscal year — and then increase to $32 billion, $73 billion, $114 billion, and $144 billion over the subsequent four years,” CEO Safra Catz in a statement. The OpenAI deal is a big a step in that direction.
Oracle’s First Quarter 2026 Performance And Prospects
Oracle’s results for the quarter fell flat while the company’s growth forecast generated an outpouring of enthusiasm.
Here are the key numbers:
- First quarter 2026 revenue: $14.9 billion – $100 million below analysts polled by Bloomberg.
- Q1 2026 adjusted earnings per share: $1.47 – a penny below the analyst consensus, noted Bloomberg.
- Q1 2026 remaining performance obligations: $455 billion, up 359%, per Bloomberg.
- FY 2026 cloud infrastructure revenue forecast: $18 billion up 77%, noted Yahoo! Finance.
- FY 2026 capital expenditures forecast: $35 billion, up 40% from its previous outlook, reported Yahoo! Finance.
- FY 2027 to 2030 cloud infrastructure revenue forecast: $32 billion (FY 27), $73 billion (FY 28), $114 billion (FY 29), $144 billion (FY 30), according to Yahoo! Finance – a 68% average annual rate of increase.
The question for investors is whether Oracle’s bullish growth forecasts suggest a continued rise in its stock.
Reasons Oracle’s Stock Could Keep Rising
Here’s the bull case: Oracle’s latest earnings report suggests growth in demand and much higher revenue driven by companies seeking to benefit from AI.
Oracle’s backlog is likely to grow even more. “We signed four multibillion-dollar contracts with three different customers in Q1,” Catz said in a statement. Oracle expects to contract with several additional multibillion-dollar customers and for its RPO to exceed half a trillion dollars, Catz added.
“We have signed significant cloud contracts with the who’s who of AI, including OpenAI, xAI, Meta, and many others,” Catz said in investor call featured by Yahoo! Finance.
Oracle is targeting two related AI markets – services for training large language models and for inference – generating content from a trained AI model. “Millions of customers are using those AI models to run businesses and governments,” Oracle co-founder and chairman Larry Ellison said in the investor conference call featured by the Wall Street Journal. “AI inference will be used to run robotic factories, robotic cars, robotic greenhouses, biomolecular simulations for drug designs,” he added.
Oracle’s unique advantage for AI inference is its databases that store private business data. The company’s “new AI database will make it easy for those businesses to query or ask questions of their private data, all of which adds to the bill for Oracle’s AI inference services,” Ellison said, according to the Journal.
Oracle is also investing in AI agents – which help people to achieve specific goals such as selecting, booking, and paying for flights and hotels for a journey, as I described in my book Brain Rush. “The new [applications] that we’re building, they’re nothing other than a bunch of AI agents that we generate that are linked together with workflow,” he added.
Oracle enjoys another advantage over cloud services rivals. “I know some of our competitors, they like to own buildings,” Catz said, according to CNBC. “That’s not really our specialty. Our specialty is the unique technology, the unique networking, the storage — just the whole way we put these systems together,” she added.
What Could Sink Oracle’s Share Price
However, this potential comes with significant risks. The stock’s premium valuation reflects high market expectations – if the market shifts money out of big tech companies or Oracle fails to beat and raise every quarter, its stock could fall.
Moreover, the high capital expenditure required to fund its expansion could reduce cash flow and highlights the financial risks involved in its ambitious plans. In addition, Oracle faces significant competition from AWS, Google Cloud, and Microsoft Azure.
While the urge to spend more on AI is currently powerful, if the economy goes into a recession, companies who buy cloud services may need to cut costs quickly to preserve cash. And since AI has yet to generate enough of a payoff to justify the investment, as I wrote last month in a Forbes article, such spending could be curtailed if the economy contracts.
Last September, generative AI was looking to me like a big dud. While people were using ChatGPT to help them draft emails and reports, there was no killer app – akin to what the iTunes store did for the iPod or the electronic spreadsheet did for personal computers, I wrote in the Boston Globe.
Last month, MIT reinforced this point with hard numbers. “Despite $30B-$40B in enterprise investment into generative AI, this report uncovers a surprising result in that 95% of organizations are getting zero return,” according to a study – based on 150 interviews with professionals, a survey of 350 employees, and an analysis of 300 public AI deployments – from MIT’s NANDA Institute featured by SeekingAlpha.
The main problem appears to be integrating AI into the enterprise. “Just 5% of integrated AI pilots are extracting millions in value, while the vast majority remain stuck with no measurable profit and loss impact,” noted the MIT NANDA Institute report.
If companies find ways to make AI pay over the next four years, Oracle’s cloud services rapid growth could continue.
What Analysts Are Saying
Analysts are mostly enthusiastic about Oracle’s prospects:
- Oracle has an inference advantage. “Oracle has made the right moves to clearly position itself as not only a meaningful player in cloud, but a meaningful player in the AI race,” CEO of research and advisory firm the Futurum Group Daniel Newman told the Journal. Inference will grow fastest and will create the biggest opportunity. With massive data and infrastructure at its disposal, Oracle “has a compelling differentiator in AI inference for serving businesses,” Newman added.
- “I’m sort of blown away,” Guggenheim analyst John DiFucci said, according to CNBC.
- “Momentous quarter.” TD Cowen’s Derrick Wood, wrote CNBC. The RPO figure is “just really amazing to see,” he added.
- “We’re all kind of in shock, in a very good way.” Deutsche Bank analyst Brad Zelnick told CNBC. “There’s no better evidence of a seismic shift happening in computing than these results that you just put up,” he said.
One note of caution came from D.A. Davidson analyst Gil Luria. While Lauria said Oracle’s projected cloud revenue figure was “absolutely staggering,” according to CNBC, the business is coming from Microsoft and Google who are “offloading their capacity to other data center providers. These are not organic customers to Oracle,” he added.
While Wall Street is optimistic, 35 analysts who cover the stock set a price target of $263.93, according to TipRanks – meaning Oracle stock is 25% over-valued.
I see the stock continuing to rise – at least until the company’s next earnings report.
