Enterprise IT juggernaut Oracle (ORCL) just pulled off a rally you expect from a tiny biotech, not a megacap software giant. Shares surged by 42% last Wednesday after the company reported its fiscal Q1 results, briefly pushing the company toward the $1 trillion mark. Sellers soon took over and pushed the stock down from the stratospheric $345 per share to a more palatable $300. That’s simply unfathomable for a business of Oracle’s size, and yet, the market makes it so.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
The quarter itself was decent, with revenue up 12% to $14.9 billion and EPS of $1.47, which actually was a slight miss. But the outlook sent every spreadsheet on Wall Street into a frenzy. Management essentially stated that the company’s AI cloud pipeline is so congested that growth is set to accelerate.
Against that setup, I don’t think the stock is expensive today, despite its extraordinary gains. I remain stoutly Bullish on this enterprise enabler that’s currently running like a bull through a Wall Street china shop.
Q1 Was the Spark, Not the Fire
For the quarter, total revenue increased 12% to $14.9 billion, with cloud (IaaS + SaaS) rising 28% to $7.2 billion and Oracle Cloud Infrastructure (OCI) surging 55% to $3.3 billion. Those growth engines offset a slight decline in legacy software, keeping the flywheel spinning while the new businesses gain momentum. The headline miss versus consensus mattered for a minute. And then the call started.
The jaw-dropper was Oracle’s backlog. Remaining performance obligations (RPO), which, in simple terms, is booked business yet to be recognized, ballooned 359% YoY to $455 billion after Oracle signed four multi-billion-dollar cloud contracts in the quarter. Management even hinted RPO could top $500 billion as additional mega-deals close. In plain English, it means that demand for Oracle’s AI-ready compute is outrunning supply.
Color around the deals added fuel with reports pointing to a blockbuster OpenAI arrangement tied to the “Stargate” build-out, as well as rapid growth from Oracle’s Multicloud database offerings with Amazon (AMZN), Alphabet (GOOGL), and Microsoft (MSFT). Notably, revenue there grew an eye-popping 1,529% as Oracle prepares dozens more data centers for partners, which helps explain the stock’s vertical takeoff.
Guidance That Rewired the Street
Then came the mic drop, as Oracle now anticipates OCI revenue to increase by 77% this fiscal year to $18 billion. Better yet, management laid out a multi-year ramp to $32 billion, $73 billion, $114 billion, and $144 billion over the next four years. Crucially, they said most of that plan is already baked into the RPO they just reported. That’s a very rare combo of hyper-growth and visibility that investors almost never get at this scale.
Executives also detailed why acceleration should persist since AI workloads prefer Oracle’s dense, high-bandwidth clusters. The firm’s Multicloud strategy integrates OCI directly with AWS, Azure, and Google Cloud, and 37 additional partner data centers are slated to come online, bringing the total to 71.
So if you’re wondering whether this was all hype, I think the market reaction across reputable outlets tells the story. Shares didn’t rip because Q1 was considered to be “just ok,” but because the multi-year guide implies a step-function change in Oracle’s trajectory, powered by AI compute contracts (including a reported $300 billion OpenAI commitment over five years), so it’s the definition of an outlook that changes the narrative.
Models Blew Up In a Good Way
After that call, analysts yanked their models higher. Consensus now places FY-2026 revenue at around $67 billion, with subsequent years stepping up sharply, reaching roughly $82 billion for FY-2027, approximately $116 billion for FY-2028, and approximately $165 billion for FY-2029. This clearly shows the acceleration embedded in the new AI backlog.
Of course, at today’s prices, Oracle trades around a low-40s forward P/E, and that can sound nose-bleed high. However, if revenue compounds along the revised path and OCI’s mix improves, operating leverage should drive EPS growth faster than sales. This is the classic cloud economies-of-scale story (more utilization, richer software mix, and Multicloud distribution). In that lens, today’s multiple can compress quickly without the stock needing to rest. The sector’s median forward P/E of 24 becomes irrelevant in that sense through this new lens.
Also consider the signposts investors lean on to justify paying up. RPO of $455 billion, a clearly articulated OCI ramp to $144 billion by FY-2030, and validation from marquee AI customers are tangible, checkable markers. If Oracle executes even near that curve, the “expensive” label will fade in the rear-view.
Is Oracle a Good Stock to Buy?
Wall Street remains very bullish on Oracle, despite its incredible spike. The stock is now carrying a Strong Buy consensus rating based on 25 Buy and eight Hold ratings. Notably, not one analyst rates the stock a Sell. Currently, ORCL’s average stock price target of $341.45 indicates ~9% upside from today’s levels.
ORCL Eyes Shift From Manic Rally to New Market Baseline
Oracle’s surge felt manic—because it was. When a megacap adds hundreds of billions in market value overnight, the reaction is bound to look outsized. Yet the catalyst wasn’t hype, but rather a reset in forward demand underpinned by signed contracts and a concrete build-out roadmap. Could execution stumble? Certainly. But with RPO at record levels, Multicloud gaining traction, and the OCI ramp laid out year by year, this rally looks less like a bubble and more like the market recalibrating to a higher baseline.