Oracle Sees Growth Potential Amidst Recent Stock Decline

Oracle (NYSE: ORCL) stock struggles amid tech market negativity but shows promising growth potential. Despite missing recent earnings and revenue targets, forecasts predict an acceleration in revenue growth driven by strong AI infrastructure demand.

Date: 28-03-2025

AI Rating: 6

**Oracle's Current Performance and Challenges**
Oracle stock has faced a 9% decline at the start of 2025 due to broader tech sector challenges triggered by trade tensions and doubts over its capital investments in AI. The company did miss Wall Street's expectations for revenue and earnings in its most recent quarter, which can create a negative sentiment around the stock due to perceived operational missteps.

**Earnings and Revenue Expectations**
Despite the current downturn, Oracle is optimistic about future growth rates. The earnings reported for the latest fiscal quarter showed only a 4% increase compared to previous periods, demonstrating a sense of stagnation. However, the company's guidance for fiscal 2026 hints at projected revenue of $66 billion (a 15% increase), and a jump to 20% growth is anticipated for fiscal 2027. This prediction implies a potential reach towards a total revenue of around $80 billion, surpassing consensus estimates.

**Backlog and Market Demand**
Oracle's backlog, valued at $130 billion, is a critical indicator of future performance, having surged by 63%. This substantial backlog is supported by strong demand for its cloud services, particularly in AI infrastructures. The report indicates that Oracle struggles to meet demand, resulting in an aggressive scaling of operations to capitalize on a growing market poised to expand at an annual rate of 31% through the decade.

**Implications for Future Profitability**
Oracle anticipates its earnings to be influenced positively by high-capex investments currently being made to enhance capacity. Currently projected earnings for fiscal 2025 stand at $6 per share, with the possibility of achieving $9.39 per share by fiscal 2028 if growth estimates hold. Using a forecasted earnings multiple that aligns with the Nasdaq-100 at 29 times earnings, this could imply a target price of $272, representing a significant upside potential.

Professional investors should weigh the current underperformance against these robust growth projections. If premises about sustained demand in cloud infrastructure and enhanced operational capacity prove accurate, Oracle presents an attractive long-term investment despite short-term volatility.

Stocks: ORCL