Oracle Corp. (ORCL) is a large multinational technology company that primarily offers cloud computing, database software, and enterprise software applications. ORCL stock is up about 50% year-to-date, but that might be just the beginning, observes Chris Preston, editor of Cabot Stock of the Week.
The company is now best known for its relational database management system and for its cloud-based enterprise applications. Cloud services represent about three-quarters of the company’s revenue. Oracle has been a solidly growing, large technology company that consistently beats market returns for many years. But the company has recently turned the corner to a whole new level. It has become an Artificial Intelligence (AI) darling.
The emergence of AI has dramatically increased the need for Oracle’s services. Among the cloud services, Oracle offers a service called Oracle Cloud Infrastructure (OCI). It allows customers to tap into its vast data center networks. While the other Oracle Databases rely on traditional management and legacy data centers, OCI is the one that provides AI capabilities. Current customers include AI start-ups, including OpenAI, Cohere, and Elon Musk’s xAI.
The growth potential is illustrated in the last quarterly report. Total revenue from the company was about $16 billion for the quarter, an 11% increase over last year’s quarter. But OCI revenue grew 52% for the same period to $3 billion. While that’s impressive, management has said growth should eclipse 70% this year. The company recently reported $130 billion in order backlogs.
The latest catalyst was the announcement of several new deals for Oracle’s infrastructure services. One is a single cloud deal worth $30 billion in annual revenue. That’s nearly three times the size of its current cloud infrastructure business. The revenue is expected to start coming in fiscal 2028.
Recommended Action: Buy ORCL.
