Oracle's Cloud Surge: Can the Old Guard Outpace the Hyperscalers?

Oracle's recent fiscal Q4 2025 earnings call delivered a jolt to its stock price, as the company unveiled cloud infrastructure (IaaS) revenue growth of 52% year-over-year and a bold forecast: cloud infrastructure growth will exceed 70% in fiscal year 2026 (FY26). This acceleration, paired with surging demand for its MultiCloud and Cloud@Customer offerings, has positioned Oracle as a formidable challenger to the hyperscalers—AWS, Microsoft Azure, and Google Cloud. For investors, the question is whether this momentum signals a structural re-rating of Oracle's valuation or a fleeting rally.

The Cloud Infrastructure Growth Engine
Oracle's cloud infrastructure (OCI) has become the crown jewel of its transition from legacy software to modern cloud services. In Q4 2025, OCI consumption revenue rose 62% year-over-year, outpacing even its own aggressive targets. CEO Safra Catz framed FY26 as a “dramatic acceleration,” projecting OCI growth to leap from 50% in FY25 to over 70% next year. This is no minor tweak: such a pace would put Oracle's cloud growth ahead of all major hyperscalers except AWS, which grew its cloud infrastructure revenue by 16% in Q1 2025.

The catalysts for this surge are twofold. First, Oracle's MultiCloud strategy—offering its database and analytics tools on competitor platforms—is gaining traction. MultiCloud database revenue grew 115% quarter-over-quarter in Q4 2025, with 23 live data centers operational and 47 more under construction. Second, Cloud@Customer, Oracle's dedicated private cloud offering for enterprise clients, saw year-over-year revenue growth of 104% in Q4, as companies seek hybrid solutions to balance security and scalability.

The AI Tailwind
Oracle's push into artificial intelligence (AI) is amplifying this momentum. While the company has been slower to market than rivals like AWS and Microsoft, its recent launch of Oracle Cloud Infrastructure AI Platform aims to capitalize on enterprises' demand for customized, industry-specific models. CFO Katharine Bingham noted that AI-driven workloads are already boosting OCI usage, with customers like Siemens and Walmart expanding their cloud footprints to support data-heavy applications.

The real kicker? Oracle's Remaining Performance Obligations (RPO)—a metric reflecting committed future revenue—hit $138 billion at the end of FY25, up 41% year-over-year, with cloud RPO growing 56%. This is a red flag for skeptics: Oracle's pipeline is not just growing; it's bulging.

CEO Confidence vs. Execution Risks
Larry Ellison and Safra Catz are unapologetically bullish. “OCI demand is skyrocketing,” Ellison declared, while Catz added that FY26 would see “dramatic increases” in revenue growth rates. To meet this demand, Oracle plans to spend over $25 billion in capital expenditures in FY26—more than double its FY24 CapEx—to expand data centers and software development.

But this comes with risks. Supply constraints, particularly in semiconductor availability, could delay data center builds, pushing some revenue into FY27. The stock's valuation—currently at 23x forward earnings—already reflects much of this optimism, and execution missteps could lead to a sharp correction.

Investment Implications
Oracle's cloud story is now too big to ignore. Its 70%+ FY26 growth forecast, if achieved, would make it one of the fastest-growing cloud providers in the industry. MultiCloud's triple-digit growth and Cloud@Customer's 104% YoY expansion suggest a strategy that is both broad and deep. Meanwhile, its $138 billion RPO backlog provides a cushion against near-term hiccups.

Analysts currently rate Oracle a “moderate buy,” with a 12-month price target of $100 (up from $85 a year ago). At its June 6 closing price of $92, there's upside potential—if OCI's growth materializes. Historically, this momentum has been reflected in post-earnings performance: buying Oracle shares on earnings announcement dates and holding for 20 trading days from 2020 to 2025 generated an average return of 14.7%, though with a maximum drawdown of -34.36% and volatility of 16.85%. This suggests that while the returns are compelling, investors should be prepared for significant price swings. Backtest the performance of Oracle (ORCL) when buying on the earnings announcement date and holding for 0 trading days, from 2020 to 2025.

Conclusion
Oracle's cloud transformation is no longer a hypothesis—it's a reality. The company's ability to command premium pricing in enterprise cloud services, combined with its hybrid cloud and AI strategies, positions it to carve out a lasting niche even as hyperscalers dominate the public cloud market. For investors willing to look past the risks of execution, Oracle's cloud renaissance could be the tech sector's next great valuation story.

Final Call: Buy Oracle if you believe enterprises will increasingly prioritize specialized, hybrid cloud solutions over commodity public cloud services. Monitor RPO growth and data center expansion timelines closely—both are key to sustaining this momentum.