Key Takeaways:
- AI Infrastructure Boom: Oracle’s RPO (remaining performance obligations) now exceeds $523 billion, up 433% year-over-year, driven by massive AI infrastructure contracts.
- Price Projection: Based on current momentum, the stock could reach $375 by May 2028.
- Potential Gains: This target implies a total return of 89% from the current price of $199.
- Annual Return: Investors could see roughly 31% growth per year over the next 2.4 years.
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Oracle (ORCL) isn’t just selling database software anymore—it’s building the infrastructure backbone for the AI revolution.
With over 700 AI customers and contracts worth tens of billions of dollars signed in a single quarter, Oracle has transformed from a legacy software company into a hypergrowth cloud and AI platform.
In fiscal Q2, total cloud revenue hit $8 billion, up 33% year-over-year. Cloud infrastructure alone grew 66%, with GPU-related revenue surging 177%.
Oracle just signed $68 billion in new contracts during a 30-day period in Q2, including deals with Meta and NVIDIA.
Despite raising its long-term revenue outlook to $225 billion by fiscal 2030, ORCL stock is trading 40% below all-time highs, creating an opportunity for investors who grasp the scale of what’s happening.
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What the Model Says for Oracle Stock
We analyzed Oracle’s future through the lens of its AI infrastructure buildout and database platform expansion. By capturing demand from AI labs while expanding its AI Database across all major clouds, Oracle is positioned at the center of the AI computing revolution.
Using a forecast of 30.3% annual revenue growth and 38.5% operating margins, our model projects the stock will rise to $375 within 2.4 years. This assumes a 24x Price-to-Earnings (P/E) multiple.
That represents a compression relative to Oracle’s current P/E of 27.3x. As the company scales infrastructure investments and absorbs higher depreciation costs, some multiple compression is reasonable.
The real value comes from explosive revenue growth as AI infrastructure scales.
Our Valuation Assumptions
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Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for Oracle stock:
1. Revenue Growth: 30.2%
Cloud Infrastructure: The business grew 66% in Q2, driven by customers like OpenAI, Meta, and NVIDIA. Oracle now operates 147 live regions with 64 more planned. The company delivered 400 megawatts of data center capacity in Q2 alone and increased GPU capacity by 50% quarter-over-quarter.
AI Database Expansion: Oracle’s multicloud database consumption grew 817% year-over-year. The company launched 11 multicloud regions in Q2, bringing the total to 45 across AWS, Azure, and GCP. The AI Database makes private enterprise data accessible to AI models while keeping it secure—a capability competitors can’t match.
Applications Growth: Cloud applications revenue grew 11%, with strategic back-office applications up 16%. The company has deployed over 600 AI agents across its application portfolio, with 2,400 customers already using them.
2. Operating margins: 38.5%
Oracle’s margin profile reflects the economics of its AI infrastructure business and platform advantages.
AI Infrastructure Margins: Oracle targets 30-40% gross margins on AI infrastructure deals over the contract life. The company pre-negotiates data center and power costs, only paying when capacity is delivered. This reduces upfront cash burn significantly.
Capacity Efficiency: Oracle reduced data center ramp time from months to weeks. The faster Oracle provisions capacity, the faster it converts backlog to revenue. In Q2, the company handed over 400 megawatts to customers and expects this pace to accelerate.
Database Leverage: The AI Database commands premium pricing due to its unique capabilities. Oracle is the only vendor that can vectorize all enterprise data types and make them accessible to any AI model while maintaining security.
3. Exit P/E Multiple: 24x
The market values Oracle at 27.3x earnings today. We chose 24x for our exit multiple to stay conservative.
Hypergrowth Premium: Oracle is growing faster than it has in 15 years. Among S&P 500 companies with over $50 billion in revenue, fewer than five are growing faster. That commands a premium valuation.
Infrastructure Investment Cycle: As Oracle scales capacity, near-term margins face pressure from depreciation. Once utilization rates increase across the data center fleet, margins will expand significantly.
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What Happens If Things Go Better or Worse?
AI infrastructure buildouts carry execution risk and capital intensity. Here is how Oracle stock might perform in different scenarios through 2028:
- Low Case: If revenue growth slows to 27.4% and margins compress to 24.8%, the stock still offers a 21% annual return.
- Mid Case: With 30.3% growth and 38.5% margins (our base assumptions), we expect a 31% annual return.
- High Case: If Oracle executes flawlessly and captures 27.7% margins while growing at 33.5%, returns could hit 38% annually.
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The range reflects different execution scenarios. In the low case, capacity delivery lags demand, or pricing pressure intensifies.
In the high case, Oracle’s operational improvements accelerate capacity delivery and utilization rates exceed expectations faster than modeled.
How Much Upside Does Oracle Stock Have From Here?
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All it takes is three simple inputs:
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- Operating Margins
- Exit P/E Multiple
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
