Oracle Bets Big on Cloud Expansion: A Sign of Strong Upside Ahead?

Oracle ORCL is making a bold bet on cloud expansion as the foundation of its long-term growth path. In the first quarter of fiscal 2026, Oracle Cloud Infrastructure (OCI) revenues climbed 55% year over year to $3.3 billion, lifting overall cloud revenues (IaaS + SaaS) 28% to $7.2 billion. Management expects OCI to expand 77% to $18 billion in fiscal 2026, with a roadmap projecting growth to $144 billion within five years. These ambitious targets are supported by a record $455 billion in Remaining Performance Obligations, driven by multibillion-dollar AI contracts with leading customers like OpenAI, NVIDIA, AMD and Meta.

To meet this demand, Oracle is investing $35 billion in CapEx during fiscal 2026 to build 37 new multi-cloud data centers. This expansion is closely aligned with hyperscaler partnerships and accelerating AI workloads, ensuring Oracle can convert backlog into recurring revenues. At the same time, innovations such as the upcoming Oracle AI Database, which integrates large language models directly into its database platform, are broadening its cloud offering.

Rising AI workloads require massive computing power, and enterprises are increasingly adopting multi-cloud strategies. Oracle’s ability to integrate across AWS, Google Cloud and Microsoft Azure reinforces the appeal of its cross-platform approach.

Risks remain around heavy spending, margin pressure and competition from established rivals. Still, with robust contract wins, expanding infrastructure and the Zacks Consensus Estimate predicting revenue growth of 16% in fiscal 2026 and nearly 21% in fiscal 2027, Oracle’s aggressive cloud expansion looks well-positioned to deliver strong upside.

Oracle’s Rivals in the Race for Cloud Growth

Microsoft MSFT Azure competes with Oracle in the cloud domain by leveraging its deep integration with existing Microsoft products, like Office 365 and SQL Server, and its hybrid-cloud strength to dominate enterprise workloads, boasting cloud revenues of $47 billion and 39% Azure growth in the recent fourth-quarter fiscal 2025. Microsoft’s vast ecosystem, rapid AI innovation and cross-industry adoption strengthen its cloud leadership against Oracle. With diverse services, hybrid capabilities and global reach, Microsoft Azure is positioned as a superior long-term choice.

Alphabet’s GOOGL Google Cloud Platform (GCP) competes with Oracle by excelling in data analytics, AI/ML and open-source technologies. With leadership in BigQuery, TensorFlow and Kubernetes, GCP provides developer-friendly, innovative tools ideal for data-driven companies. Its transparent pricing and powerful AI capabilities increase appeal, although OCI often sets higher standards when it comes to database performance and traditional enterprise workloads. While GCP's legacy systems may require further refactoring, Google's relentless innovation positions it as a strong choice for modern, cutting-edge cloud adoption.

ORCL’s Price Performance, Valuation & Estimates

Shares of Oracle have surged 84.5% year to date, outperforming both the Zacks Computer and Technology sector’s return of 22.6% and the Zacks Computer - Software industry’s rise of 20.8%.

ORCL’s YTD Price Performance

From a valuation standpoint, ORCL appears overvalued, trading at a forward 12-month Price/Earnings ratio of 43.65x, which is higher than the industry average of 33.54x. Oracle carries a Value Score of F.

ORCL’s Valuation

The Zacks Consensus Estimate for ORCL’s fiscal 2026 revenues is pegged at $66.75 billion, indicating 16.29% year-over-year growth. The consensus mark for ORCL’s fiscal 2026 earnings is pegged at $6.75 per share, up by a couple of cents over the past 30 and 60 days. The earnings figure suggests 11.94% growth over the figure reported in fiscal 2025.

ORCL stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

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