Will Oracle's RPO Expansion Strengthen Long-Term Revenue Outlook?

Oracle’s ORCL rapid expansion in Remaining Performance Obligations (RPO) is emerging as a key indicator of long-term revenue sustainability at a time when cloud spending visibility remains uneven. The sharp rise in backlog provides Oracle with multi-year revenue clarity and strengthens confidence in sustained growth beyond fiscal 2026.

In second-quarter fiscal 2026, Oracle reported RPO of $523 billion, more than quadrupling year over year, driven by large, long-duration cloud and AI infrastructure contracts with hyperscale customers such as Meta and NVIDIA. Near-term RPO, representing revenues expected to be recognized within the next 12 months, increased 40% year over year, indicating rapid backlog monetization and reducing reliance on long-term contract execution.

The composition of RPO further reinforces its durability. A significant portion is tied to Oracle Cloud Infrastructure (OCI), GPU-intensive AI workloads and multicloud database deployments — segments benefiting from structurally stable demand. In the reported quarter, OCI revenues grew 68%, GPU-related revenues rose at a triple-digit and multicloud database consumption surged more than 800%, underscoring that RPO growth is being driven by structural cloud and AI adoption.

Oracle’s RPO expansion also strengthens its long-term growth outlook, reinforcing confidence in acceleration beyond fiscal 2026. The projected $4 billion in incremental fiscal 2027 revenues, alongside an unchanged fiscal 2026 revenue forecast of $67 billion, indicates that backlog strength is already translating into measurable revenue growth. The Zacks model reflects similar optimism, forecasting total revenue growth of 16.7% in fiscal 2026 and 15.5% in fiscal 2027.

How Oracle Compares With Its Closest Cloud Rivals

Oracle’s cloud and AI infrastructure business competes directly with major hyperscalers such as Alphabet GOOGL and Microsoft MSFT for large-scale enterprise and AI-driven contracts.

Alphabet’s expanding cloud and AI ecosystem is strengthening its position against Oracle. Alphabet is benefiting from strong growth in AI infrastructure, Google Cloud and Search, with cloud backlog reaching $155 billion in the third quarter of 2025. Customer adoption of Alphabet’s AI tools is driving more billion-dollar deals, with nine of the top 10 AI labs now using Google Cloud. Although Oracle continues to post strong AI contract wins, Alphabet’s scale, diversification and balance sheet provide greater investment stability.

Microsoft stands as Oracle’s strongest rival in cloud and AI infrastructure, supported by Azure’s scale and enterprise reach. Microsoft reported 40% year-over-year growth in Azure and other cloud services in the first quarter of fiscal 2026, while Microsoft Cloud revenues rose 26%. Microsoft’s commercial remaining performance obligations expanded 51% to $392 billion, highlighting strong multi-year demand visibility. Supported by Windows, Microsoft 365, Dynamics and LinkedIn, Microsoft maintains a powerful, data-backed competitive edge in enterprise AI and cloud adoption.

ORCL’s Price Performance, Valuation & Estimates

Shares of Oracle have declined 19.8% in the past six months, underperforming both the Zacks Computer and Technology sector’s growth of 18.9% and the Zacks Computer - Software industry’s fall of 9.3%.

ORCL’s Six-Month Price Performance

From a valuation standpoint, ORCL stock is currently trading at a forward 12-month Price/Earnings ratio of 24.63x, which is lower than the industry average of 27.76x. Oracle carries a Value Score of D.

ORCL’s Valuation

The Zacks Consensus Estimate for ORCL’s fiscal 2026 earnings is pegged at $7.38 per share, up by 1.9% over the past 30 days. The earnings figure suggests 22.39% 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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