Is ORCL Stock a Buy Sell or Hold?

High-tech plays, nowadays, have shifted to the cloud. A laundry list of tech companies have started working on the cloud and moving operations there instead of keeping them on-premise. Oracle Corporation (NYSE:ORCL) is one such company that took this leap.

For most of its operating history, Oracle was known for database offerings but its valuation multiples re-rated when it pivoted to cloud computing and data analytics. And this has seemingly paid off because Oracle’s stock has posted consistent gains for investors. Over the past five years, the company’s stock has gained more than 200% and in the past year alone, the share price is up by more than 50%.

But is there a downside risk to the stock, which investors won’t want to miss.

What Is Going On with Oracle Corporation?

After Oracle’s AI pivot, investor attention has turned towards AI, aka the ultimate Wall Street buzzword at the moment. While there might be some firms where AI can be used as a marketing tactic rather than as something additive to their operations, quite aptly named AI-washing, Oracle has legitimately pivoted to include more AI in its suite of products.

The incorporation of AI into cloud infrastructures has already produced a host of improvements. And the company has started enhancing its generative AI capabilities as a way to stay ahead of the competition.

The traditional AI that the company already had before ChatGPT brought Generative AI into the limelight was adept at detecting patterns and predicting numbers, but the Gen AI capabilities took things up a notch by incorporating the ability to explain the numbers in words. So, Oracle’s transition to incorproate AI was viewed positively.

Wedbush analyst Dan Ives commented how the company could be a “major beneficiary of the AI revolution” because the data that Oracle possesses could be a significant factor in the monetization of AI software.

It almost goes without saying that Oracle is trying to tap into a market that is highly lucrative, to say the least. JPMorgan is of the opinion that generative AI will result in incremental IT spending and growth across the software landscape. In addition, Goldman Sachs sees cloud computing sales rising to $2 trillion by the end of the decade, of which 10% -15% of spending will be due to gen AI.

Oracle is also getting some support from the newly minted Trump administration. It was announced just a few weeks ago that the company was involved in a joint venture to build AI infrastructure in the U.S. Other notable names included in the joint venture were OpenAI and SoftBank. The Trump administration’s plans posit $100 billion initially and as high as $500 billion over a stretch of four years.

Sales Up But Profits Climb Higher

Oracle has last reported Q2 results for FY 2025 with record-level demand for its AI offerings, a positive sign. This, in turn, led to its Oracle Cloud Infrastructure revenues climbing by 52%. The company also pointed out that this growth rate was higher than any of its hyperscale cloud infrastructure competitors.

Overall, Oracle’s revenue spiked by 9% year-over-year, a decent rate given its scale. The largest segment and the one that reported the largest growth is its cloud services and license support revenue, which grew by 12% from the prior year’s period to reach more than $10 billion. 

The company is also solidly profitable and bottom-line growth is doing better than the top-line one. Net income went up by 26% from its year-ago value to $3.15 billion or $1.10 per share.

AI has largely been the defining factor in driving up this growth. Oracle reported that GPU consumption was up 336% in the quarter. This was attributable to the company delivering the world’s largest and fastest AI SuperComputer, scaling up to 65,000 NVIDIA H200 GPUs. The other notable development the company chose to report was its partnership with Meta to collaborate and power Meta’s Llama models.

There’s one more factor that is still adding to the company’s current momentum, which is remaining performance obligations that climbed 50% to $97 billion. This deferred demand is expected to translate into higher revenues in the future. As a result, Oracle is expecting its total cloud revenue to be over $25 billion in the current fiscal year.

So, while there are some tailwinds based on how prospective it looks at the moment. The stock does not come particularly cheap, however, because price is sitting at 29.07x its forward non-GAAP earnings.

Is Oracle Stock a Buy Sell or Hold?

The broad consensus among 32 analysts is that Oracle is a buy with upside to $195 per share and translates to 16.5% upside.

A discounted cash flow forecast analysis is much less bullish and pegs fair value at $142 per share suggesting meaningful risk of 18% to the downside.

Trading at 41x earnings and with 6% top line growth doesn’t sound like a recipe for a lot of upside but the reality is there is 26% net income growth forecast over the next 5 years which would justify the current share price and then some. 

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.