Is Now the Time to Buy Oracle Stock After Its Q1 Earnings-Fueled Run?

Oracle ORCL finds itself at an inflection point following extraordinary first-quarter fiscal 2026 results that sent its stock soaring 36% in a single day, marking the best performance since 1992.

The enterprise software giant's shares have gained 97% year to date, dramatically outperforming the broader Zacks Computer and Technology sector’s growth of 18.2% and leaving competitors like Microsoft MSFT, Alphabet GOOGL-owned Google and Amazon AMZN trailing with returns of 18.7%, 26.3%, and 5%, respectively. While the stock's meteoric rise and ambitious cloud infrastructure projections have captivated Wall Street, investors must carefully weigh whether current valuations present an optimal entry point or suggest patience is warranted.

ORCL Outperforms Sectors, Peers YTD

Cloud Infrastructure Momentum Drives Transformation

Oracle's fiscal first quarter revealed both promise and complexity. While the company matched expectations with adjusted earnings of $1.47 per share, revenues of $14.93 billion missed the consensus mark marginally by 0.59%. The company's remaining performance obligations skyrocketed to $455 billion, representing a staggering 359% year-over-year increase driven by multiple multi-billion-dollar contracts signed during the quarter.

The cloud revenue trajectory presents an ambitious growth story that has captured Wall Street's attention. Management projects cloud infrastructure revenues are expected to reach $18 billion in fiscal 2026, implying 77% growth from approximately $10 billion in fiscal 2025. Looking further ahead, Oracle forecasts this figure will expand to $32 billion, $73 billion, $114 billion, and ultimately $144 billion over the subsequent four fiscal years. This aggressive outlook significantly exceeds previous analyst estimates and positions Oracle as a formidable competitor to established cloud leaders.

The Zacks Consensus Estimate for fiscal 2026 revenues is currently pegged at $66.66 billion, suggesting growth of 16.14% from the year-ago quarter’s reported figure. The consensus mark for fiscal 2026 earnings is pegged at $6.72 per share, unchanged over the past 30 days.

Oracle Corporation Price and Consensus

Oracle Corporation price-consensus-chart | Oracle Corporation Quote

Oracle's strategic partnerships have emerged as crucial growth catalysts. The company secured a landmark agreement with OpenAI, reportedly worth $300 billion over five years beginning in 2027, representing one of the largest cloud contracts in history. Additionally, Oracle expanded collaborations with Google Cloud to offer Gemini AI models through its infrastructure and deepened its relationship with ByteDance, particularly in Southeast Asian markets. The deployment of OpenAI's GPT-5 across Oracle's database and application portfolio further strengthens its artificial intelligence capabilities, enabling customers to leverage advanced reasoning and coding capabilities within their existing Oracle environments.

Valuation Concerns Warrant Caution

Despite the compelling growth narrative, current valuations suggest investors should exercise patience rather than chase momentum. The stock's price-to-earnings ratio of 46.96 times is above the Zacks Computer-Software industry average of 33.34 times and the 5-year median of 21.59 times, raising questions about sustainability. While Oracle's cloud transformation story justifies some premium valuation, the magnitude of recent gains has likely pulled forward significant future appreciation potential.

ORCL Trades at a Premium P/E Ratio

The company's capital expenditure plans provide additional context for evaluation. Management indicated fiscal 2026 capital expenditures will reach approximately $35 billion, representing 65% growth as Oracle aggressively builds out its cloud infrastructure capacity. This substantial investment requirement, while necessary for competitive positioning, will pressure near-term cash flows and returns on invested capital. Oracle's multi-cloud database revenues from partnerships with Amazon, Google, and Microsoft grew an impressive 1,529% in the first quarter, but this explosive growth rate will inevitably moderate as the base expands.

Competition remains intense across the cloud infrastructure landscape. Microsoft's Azure generated $75 billion in revenues over the trailing 12 months, providing perspective on Oracle's ambitious targets. While Oracle's partnerships and technology innovations position it well for market share gains, achieving projected growth rates will require flawless execution in an increasingly competitive environment where established players continue investing heavily in artificial intelligence and cloud capabilities.

Investment Recommendation

For existing shareholders, holding Oracle stock appears prudent given the company's strong cloud momentum and expanding AI capabilities. The multi-year growth trajectory supported by substantial customer commitments provides visibility that justifies maintaining positions despite elevated valuations. However, new investors should consider waiting for a more attractive entry point, potentially in the $260-$280 range, which would align valuations closer to historical norms while still reflecting the improved growth profile.

The combination of mixed quarterly results, premium valuations, and substantial capital requirements suggests near-term consolidation remains likely despite the transformational cloud opportunity. Patient investors who wait for market volatility to create better risk-reward dynamics will likely find more compelling entry opportunities in 2025, particularly if broader technology sector rotation or macroeconomic concerns pressure high-multiple stocks. Oracle's fundamental transformation remains intact, but current prices have largely discounted the positive developments, making patience the optimal strategy for prospective investors. Oracle currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research