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- Oracle‘s (ORCL) AI-driven cloud growth, fueled by deals with major hyperscalers, positions it as an under-the-radar AI stock with significant long-term potential.
- Despite a Q1 earnings miss, Oracle’s 359% RPO surge to $455 billion signals robust future revenue, outpacing many overhyped AI peers.
- Strategic wins like Stargate and hyperscaler partnerships highlight Oracle’s pivot to AI infrastructure, making it a compelling buy for investors.
- Nvidia made early investors rich, but there is a new class of ‘Next Nvidia Stocks’ that could be even better. Click here to learn more.
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Artificial intelligence (AI) is reshaping industries from healthcare to finance, powering innovations that promise unprecedented efficiency and discovery. Yet, in the spotlight of this revolution, giants like Nvidia (NASDAQ:NVDA) and Palantir Technologies (NYSE:PLTR) have dominated headlines, their stocks soaring on AI hype.
Beneath the surface, however, a cadre of established tech players has been quietly building AI capabilities, often overlooked amid the frenzy. These sleeper AI stocks, with deep enterprise roots and scalable infrastructure, are now emerging as hidden gems with explosive upside potential.
As investors hunt for the next big winners beyond the obvious names, one company stands out: Oracle (NYSE:ORCL). This database and cloud powerhouse has unveiled a transformative earnings vision that positions it as a long-term AI mega star for savvy investors.
Oracle’s Earnings Surprise: Miss on Bottom Line, Boom on Bookings
Oracle’s fiscal 2026 first-quarter earnings — released after the market closed yesterday — painted a tale of contrasts. The company reported total revenue of $14.9 billion, up 12% year-over-year but slightly below Wall Street’s $15.03 billion consensus. Earnings, however, came in at $1.47 per share on a non-GAAP basis, missing the $1.48 estimate by a hair, pressured by a one-time $958 million tax expense tied to recent U.S. tax law changes.
Despite these slips, the market’s focus zeroed in on the explosive growth signals from Oracle’s cloud segment.
Cloud revenue (IaaS plus SaaS) surged 28% year-over-year, hitting $7.2 billion, with Oracle Cloud Infrastructure (OCI) alone jumping 55% to $3.3 billion. The real headline-grabber? Remaining Performance Obligations (RPO) — Oracle’s key metric for future booked revenue — skyrocketed 359% to $455 billion as of August 31. This backlog underscores massive commitments from hyperscalers, including blockbuster deals to host OCI within the clouds of Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL), and Microsoft (NASDAQ:MSFT). These partnerships allow Oracle to leverage rivals’ vast data center footprints while expanding its AI-ready infrastructure.
Skyrocketing Cloud Projections Fuel Investor Frenzy
Looking ahead, Oracle’s guidance lit a fire under the stock. OCI revenue is forecasted to balloon 77% to $18 billion for fiscal 2026, building on $10.3 billion in fiscal 2025. Management envisions this escalating to $32 billion in 2027, $73 billion in 2028, $114 billion in 2029 — and a staggering $144 billion by fiscal 2030.
CEO Safra Catz highlighted four multi-billion-dollar contracts signed in Q1 alone, signaling unrelenting AI demand. “Demand for Oracle Cloud Infrastructure continues to build,” she noted, crediting AI workloads for the surge.
The market reacted with gusto: ORCL shares are exploding about 30% in premarket trading this morning, pushing toward all-time highs and adding roughly $200 billion to the company’s market cap.
This rally, one of Oracle’s strongest ever, reflects bets on its pivot from legacy software to AI cloud dominance. With OCI now powering frontier AI models for clients like OpenAI, Oracle is no longer just a database vendor — it’s a critical AI infrastructure player.
A Cautionary Tale from Fellow AI Contenders
Yet, amid the euphoria, investors should pause. Oracle’s pattern — missing short-term estimates but touting blockbuster future growth — echoes stumbles by other AI darlings. Server maker Super Micro Computer (NASDAQ:SMCI), for example, offered up aspirational revenue guidance of $40 billion for fiscal 2026, only to continuously lower and withdraw the figure. Similarly, enterprise AI software firm C3.ai (NYSE:AI) plunged after its just-released fiscal Q1 2026 as sales were in disarray and a CEO transition. The company also withdrew its full-year guidance.
These cases illustrate a common pitfall: Overly optimistic forecasts after misses can inflate expectations, only for execution risks — like supply chain woes or market saturation — to force pullbacks. Oracle, while not in SMCI or C3.ai’s volatile niche, operates in a hyper-competitive cloud arena. Its scale tempers some risks, but investors still might want to dial back unbridled enthusiasm, watching for consistent delivery on that $455 billion RPO.
Key Takeaways
This Oracle renaissance has been brewing for months, fueled by strategic AI bets. Its pivotal role in the Stargate project — a $500 billion U.S. AI infrastructure juggernaut with OpenAI, SoftBank, and Nvidia — exemplifies the big wins. Other triumphs include deepened ties with hyperscalers and federal clients, like the Defense Dept.
If projections hold, Oracle could redefine its trajectory: $144 billion in OCI revenue by 2030 would dwarf current figures, potentially driving total revenue past $200 billion annually and EPS toward $18+ with 25% compound growth.
Valuation-wise, ORCL trades at reasonable levels compared to Nvidia and factoring in its 0.8% dividend yield and $21.5 billion in trailing cash flow. Oracle’s enterprise moat, RPO visibility, and AI pivot strongly suggest undervalued growth. It’s clear, ORCL stock merits a buy for long-term portfolios eyeing AI’s next phase.
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