Analyst Explains How Oracle's (ORCL) Rising CapEx Will Result in 'Accelerating' Revenue Growth

Oracle Corp (NYSE:ORCL) is one of the 10 Buzzing Stocks to Watch as AI Trade Makes a Comeback.

Brad Reback, Stifel managing director, in a latest program on CNBC talked about his latest take on Oracle Corp (NYSE:ORCL) and explained why he’s bullish on the company. The analyst believes Oracle Corp (NYSE:ORCL) increasing spending will pay off mainly due to AI and Cloud.

“We think there’s plenty left in front of us. And really what got us over the hump here is the capex spending over the last couple of quarters had meaningfully accelerated, and our concern was that they weren’t going to be able to keep pace with the likes of the other hyperscalers. But with nine billion of spend in the last quarter, with capex expected to be up 4x this year from two years ago, it’s very clear they’re spending and that their backlog should convert into accelerating revenue growth here in the coming quarters, well on their way to getting to 20% revenue growth next fiscal year.”

Asked about the specific areas of potential growth for Oracle Corp (NYSE:ORCL), here is what the analyst said:

“It’s definitely the cloud, and that’s a combination of, as you just mentioned, cloud infrastructure, which is existing customers moving their Oracle databases to the cloud, be it Oracle’s cloud or Oracle running inside of hyperscaler clouds, and then increasingly AI. And then beyond that, they have a really significant level of SaaS apps that continue to grow at 20%. So when you bring it all together, Oracle’s cloud, which is approaching more — which is more than the majority of the revenue right now — is growing 40% year-over-year this year, expected, and should continue to sustain that pace going forward.”

ClearBridge Dividend Strategy stated the following regarding Oracle Corporation (NYSE:ORCL) in its second quarter 2025 investor letter:

“Of course, what makes the ClearBridge Dividend Strategy unique is that we do not just invest in dividend stalwarts in communications services, energy, health care and consumer staples. Our flexible approach to dividends enables us to invest in stocks with lower upfront yields, provided they offer compelling risk/rewards and the companies can significantly grow their dividends. This is how we got to own Broadcom and Oracle Corporation (NYSE:ORCL), two of the best AI plays around, (in addition to Apple, Microsoft, Visa and others). But, unlike today, we built our positions in Broadcom and Oracle when their stocks embedded weak outlooks, not meteoric expectations (Exhibit 2).

We bought Oracle in September 2020 when it was trading 14x earnings and investors were sour on the name. It has likewise performed well. We have taken gains along the way but still hold a large, but measured position, of 2.2%. We would be better off had we not trimmed our holdings, but investing requires making decisions probabilistically, without perfect knowledge of how the future will unfold.”

While we acknowledge the potential of ORCL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.