Oracle's Cloud Expansion via AWS: 3 Key Reasons to Hold the Stock Now

Oracle Corporation ORCL reached a critical inflection point with its Oracle Database@AWS launch, completing partnerships across all major hyperscalers, including Amazon AMZN, and positioning the company as a crucial bridge between traditional enterprise computing and AI-driven cloud infrastructure. The stock has surged 43% year to date, reflecting strong execution of its cloud transformation strategy, while trading at a 17.7x forward P/E despite elevated growth expectations.

Oracle's fourth-quarter 2025 results validated this transformation thesis, with total revenues of $15.9 billion (up 11% YoY) and cloud infrastructure revenue growth accelerating to 52%. The company's raised fiscal 2026 guidance projects more than $67 billion in revenues (16% growth) and expects cloud infrastructure growth to exceed 70%. Oracle's $138 billion remaining performance obligations (RPO) backlog provides unprecedented revenue visibility, while a $30 billion annual cloud deal with OpenAI starting fiscal 2028 represents a potential game-changer for the business.

The Zacks Consensus Estimate for fiscal 2026 revenues is currently pegged at $66.55 billion, suggesting growth of 15.94% from the year-ago quarter’s reported figure. The consensus mark for fiscal 2026 earnings is pegged at $6.71 per share, up 1.1% over the past 30 days.

Oracle Corporation Price and Consensus

Oracle Corporation price-consensus-chart | Oracle Corporation Quote

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Database@AWS Completes Multicloud Strategy

The Oracle Database@AWS launch represents more than a technical integration — it's a strategic completion of Oracle's "infrastructure anywhere" vision. Unlike simple cloud interconnections, Oracle deploys its cloud infrastructure physically within AWS data centers, providing customers with native Oracle database services, including Autonomous Database and Exadata, while maintaining seamless integration with AWS services like Amazon Redshift and SageMaker.

Key differentiators include zero-ETL integration capabilities, Oracle Database 23ai with AI Vector Search, and the ability to use existing AWS commitments through the AWS Marketplace. Early enterprise adopters, including Fidelity Investments, Nationwide, and SAS, have highlighted the elimination of previous friction points that kept Oracle workloads off AWS infrastructure.

This partnership completes Oracle's coverage across all major cloud providers like AWS, Microsoft MSFT Azure, Alphabet GOOGL-owned Google Cloud, addressing the reality that 98% of enterprises use or plan to use multiple cloud providers. The database multicloud revenue surge of 115% quarter over quarter in fourth-quarter 2025 demonstrates strong customer demand for this flexibility.

Strong Financial Execution Drives Growth

Oracle's fourth-quarter 2025 performance exceeded Wall Street expectations across key metrics, with cloud services revenues of $6.7 billion (up 27% YoY) driving overall growth. Cloud infrastructure revenues reached $3.0 billion with 52% growth, while the broader cloud business approaches a $12 billion annual run rate. Operating margins remain healthy at 44%, though near-term pressure is expected as the company scales its infrastructure investments.

The company's ambitious fiscal 2026 guidance reflects confidence in demand acceleration. Management projects cloud infrastructure growth exceeding 70% in fiscal 2026, up from 50% in fiscal 2025, while total cloud growth should exceed 40%. RPO growth is expected to surpass 100%, indicating strong customer commitment to Oracle's cloud services.

Capital expenditure is expected to exceed $25 billion in fiscal 2026, representing Oracle's largest infrastructure investment cycle. While this creates near-term free cash flow pressure, the company's $138 billion RPO backlog provides strong visibility into returns on these investments.

AI Infrastructure Positioning Creates Competitive Advantages

Oracle's strategic pivot toward AI infrastructure has positioned the company as a critical enabler of enterprise AI adoption. The $30 billion annual cloud deal with OpenAI through the Stargate project represents validation of Oracle's AI infrastructure capabilities, while partnerships with Meta, NVIDIA, and other AI leaders demonstrate broadening enterprise adoption.

Oracle Database 23ai introduces more than 300 new AI-focused features, including native vector search capabilities that eliminate the need for separate vector databases. This converged approach allows customers to run AI workloads directly alongside traditional database operations, reducing complexity and maintaining Oracle's database-centric competitive moat.

The company's infrastructure expansion includes 47 new data centers under construction, with customers already requesting all available cloud capacity. Oracle's unique positioning in providing AI infrastructure while maintaining enterprise-grade database capabilities differentiates it from pure-play cloud providers.

Investment Outlook and Valuation

Oracle trades at a three-year EV/EBITDA multiple of 28.93x, substantially above the Zacks Computer-Software industry average of 20.12x, indicating premium valuation expectations. The company's transformation success depends on flawless execution of its massive infrastructure investment cycle, while competitive pressure from AWS, Microsoft Azure, and Google Cloud remains intense.

ORCL’s EV/EBITDA TTM Ratio Depicts Premium Valuation

Shares of Oracle have gained 40.4% so far this year, outperforming the Zacks Computer and Technology sector’s growth of 7%. Shares of Microsoft and Amazon have returned 19.6% and 1.6% year to date, while Google shares have lost 5.4%, respectively.

Year-to-Date Performance

Oracle presents a compelling long-term investment opportunity for investors seeking exposure to AI infrastructure and enterprise cloud transformation. For existing holders, maintaining positions makes sense given Oracle's successful execution and improving competitive positioning. New investors should consider accumulating shares during market volatility, particularly if economic concerns create temporary weakness in technology valuations. Oracle 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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