Oracle's Cloud Supremacy in the AI Age: Why the Stock Is Poised for a Comeback

Oracle (ORCL) has long been a titan in enterprise software, but its recent pivot to cloud infrastructure and AI-driven innovation is now positioning it for a new era of dominance. Despite near-term execution challenges and analyst skepticism, Oracle's aggressive cloud growth, low-latency infrastructure advantages, and strategic AI investments create a compelling case for long-term investors. Here's why the stock deserves a closer look.

The Cloud Growth Engine: 70%+ Trajectory and the AI Tailwind

Oracle's cloud infrastructure (OCI) is on fire. In its latest quarter, OCI revenue surged 54% year-over-year to $3.11 billion, while its cloud applications (SaaS) grew 10%, contributing to total cloud revenue of $5.6 billion. The company now projects OCI growth to exceed 70% in fiscal 2026, driven by AI workloads, enterprise migrations, and partnerships like its $500 billion Stargate project with OpenAI and SoftBank. This initiative aims to build AI-specific data centers, with Oracle already securing up to $40 billion in NVIDIA GPUs for AI model training.

Crucially, Oracle's Remaining Performance Obligations (RPO)—a metric of future revenue commitments—soared to $138 billion in Q4, up 41% year-over-year. This signals strong demand for OCI, particularly from enterprises shifting to hybrid cloud models. For instance, the Chinese e-commerce giant Temu is reportedly migrating massive workloads to OCI, while the Cleveland Clinic and UAE's G42 are leveraging Oracle's AI platforms for healthcare and climate research.

Why Oracle's RDMA Advantage Matters in the AI Race

While hyperscalers like AWS (AMZN) and Azure (MSFT) dominate the cloud market, Oracle's RDMA (Remote Direct Memory Access) technology gives it a critical edge for AI. OCI's RDMA-enabled networks achieve latency as low as 2.5 microseconds, enabling seamless communication between thousands of GPUs. This is vital for distributed AI training, where even millisecond delays can cripple performance.

Oracle's Supercluster architecture, paired with NVIDIA's Blackwell and Hopper GPUs, supports clusters of up to 131,072 GPUs, dwarfing competitors' scalability. By contrast, AWS's EC2 and Azure's VMs lack this level of low-latency integration at scale. Oracle's no-extra-cost model for RDMA and GPU storage (e.g., up to 61.44 TB of local NVMe SSDs) also undercut rivals' pricing—by 220% in some cases, per Oracle's claims.

The Near-Term Hurdles: Missed Targets and GPU Delays

Analysts are right to question Oracle's ability to meet its $67 billion fiscal 2026 revenue target. The company is projected to fall short of its $25 billion FY2025 cloud revenue goal, with delays in GPU shipments and supply chain bottlenecks. Additionally, Oracle's stock has underperformed peers like AWS and Google Cloud in the past year, as investors grow impatient with execution gaps.

Why the Skeptics Are Missing the Bigger Picture

While near-term misses are valid concerns, they overlook three critical factors:
1. AI's Explosive Demand Curve: Enterprises are shifting to AI-driven solutions at a breakneck pace. Oracle's hybrid cloud model—combining public, private, and edge computing—caters to this trend, as seen in its 115% QoQ growth in MultiCloud database revenue.
2. Cost Leadership: Oracle's OCI pricing is 50–80% cheaper than hyperscalers for networking, storage, and compute. This cost advantage is a magnet for budget-conscious enterprises, especially as AI workloads grow.
3. The Stargate Catalyst: The $500 billion Stargate project isn't just about data centers—it's a partnership to standardize AI infrastructure, reducing fragmentation and adoption barriers. Oracle's AI Agent Studio, which embeds generative AI into its SaaS tools without extra costs, is already driving experimentation.

Valuation and Investment Thesis

Oracle's stock trades at a forward P/E of 13.5x, well below peers like Microsoft (26x) and Alphabet (20x). Even after its recent rally, ORCL is undervalued relative to its cloud growth trajectory and AI potential. The $104 billion fiscal 2029 revenue target—now likely to be revised upward—is achievable if OCI maintains its 70%+ growth clip.

Investment Recommendation: Buy Oracle (ORCL) with a 3–5 year horizon. The stock's current valuation, paired with its AI-driven tailwinds and low-latency infrastructure edge, makes it a rare value play in the cloud sector. Near-term misses are likely to be temporary, as GPU supply stabilizes and enterprises deepen their AI commitments.

Conclusion

Oracle's cloud and AI ambitions are no longer hypothetical—they're materializing in revenue, partnerships, and RPO. While execution hiccups will test investors' patience, the company's strategic bets on low-latency infrastructure, hybrid cloud, and AI-as-a-service position it to capture a disproportionate share of the $2 trillion AI market. For investors willing to look past the noise, Oracle is a buy.

Disclosure: This analysis is for informational purposes only and does not constitute financial advice.