Oracle Corporation | ORCL & Ai

17 Sep

If there is one person that you can compare it with Tony Stark aka IRON MAN is Larry Ellison
the ruthless entrepreneur who is born to win and be the number 1. Since the close of trading Friday, Ellison’s net worth has pumped 8 billion dollar to reach $ 206 billion

Oracle’s stock has reached new highs following its earnings report last week, which exceeded expectations and raised its revenue forecast for fiscal 2026.

Orcl have risen 20% this month and If this upward trend holds, it would mark their best performance since October 2022, when the stock jumped 28%, and the second best month since October 2002, nearly two decades ago.

The company’s stock success is partly driven by its involvement in the booming artificial intelligence sector. Ellison, Oracle’s founder since 1977, mentioned in last week’s earnings call that the company is building data centers to meet the growing demand for generative AI.

“We are literally building the smallest, most portable, most affordable cloud data centers all the way up to 200 megawatt data centers, ideal for training very large language models and keeping them up to date,” Larry said during the call

also he recently mentioned that Elon Musk and I ‘begged’ Jensen Huang for GPUs over dinner!We need you to take more of our money please!! It went ok. I mean, it worked!

Oracle also announced last week a partnership with Amazon’s cloud computing division to run its database services on dedicated hardware. Over the past year, it has formed similar alliances with Microsoft and Google, two other major cloud infrastructure providers

Oracle's cloud services are a key driver of their success, with revenue from this division growing 21% year over year, reaching $5.6 billion in quarterly earnings

Oracle is becoming a crucial provider, acting like a foundational layer for AI-focused companies. Their database systems are now critical to supporting businesses like OpenAI, AWS, and Google Cloud in building the infrastructure for future AI advancements. Despite AWS and Google Cloud being direct competitors, Oracle’s software remains essential to AI’s future.

Oracle's technology plays a foundational role, much like GPUs have in AI development. As companies seek efficient cloud-database solutions for AI workloads, Oracle is well-positioned to fulfill this demand.

Considering their strong Q1 performance and the central role of their database software in this field, I now view Oracle as a strong buy. The company's AI-powered cloud solutions, strategic partnerships, and growing database market make their technology indispensable for the future of AI

Oracle’s fiscal Q1 for FY 2025 exceeded expectations, with non GAAP earnings per share (EPS) of $1.39, surpassing estimates by $0.06, and revenue hitting $13.3 billion, outperforming projections by $60 million. The cloud segment, which includes their AI database software, remains a significant growth driver, generating $5.6 billion in revenue.

Most of Oracle’s revenue came from the Americas, contributing $8.3 billion, a 6.9% year-over-year increase. The AI revolution, gaining momentum in the US, aligns with their strong revenue growth in this region.

During the Q1 earnings call, management emphasized their expanded partnerships with major tech companies like Google Cloud (Alphabet Inc) and AWS (Amazon), which are notable given that they are also competitors. Oracle highlighted its success in the AI training space, pointing to the construction of large data centers equipped with ultra-high-performance RDMA networks and 32,000-node NVIDIA GPU clusters.

In the EMEA region, crucial to Oracle’s growth due to rising demand for cloud infrastructure and AI solutions among European enterprises and governments (sovereign AI), the company reported $3.3 billion in revenue.

Oracle’s earnings per share aka EPS is projected to grow at a compound annual rate of 13.5% for FY 2025, increasing to 14.41% in FY 2026, and continuing to compound at a modest double-digit rate in the coming years.

While these projections show strong potential for Oracle to be a compounder, I believe they may be somewhat conservative. The company’s remaining performance obligations (RPO) jumped 53% year-over-year to $99 billion by the end of the first fiscal quarter, indicating that their pipeline of signed work is growing faster than revenue. Once Oracle scales its solutions and workforce to match this RPO growth, we could see both revenue and EPS accelerate further.

In fact, while Oracle’s forward revenue growth is projected at just 8.86% for the next 12 months, their backlog is growing by over 50%. This suggests a notable gap between revenue expectations and actual demand.

I believe the current revenue growth projections are too low, and once revised upward, they could become a key growth catalyst for the company.

As for Oracle’s valuation, its forward price-to-earnings (P/E) ratio stands at 24.74, which is just 6.76% above the sector median of 23.17. However, given Oracle’s growth potential, I think it warrants a P/E ratio closer to 30.12, which is roughly 30% above the sector median. This would imply an additional 21.75% upside for the stock, excluding dividends.

With a forward P/E ratio only slightly above the sector median, despite Oracle’s impressive growth, the company’s performance suggests the stock should be trading at a higher valuation.

Larry Ellison is the man that I always can trust his vision and always bullish on his spirit and his ambitious. Oracle expanding influence in AI, coupled with robust revenue growth, positions the stock for significant upside. AI is like a modern day Gold Rush, and Oracle, much like GPU makers, is providing the essential tools the "pickaxe" for AI companies so That’s a space I’m eager to invest in

the chart looks insane and if there will be pullback I consider it as a buy opportunity