Oracle's Undervalued Cloud Momentum: Why ORCL is Poised for Explosive Growth

Victor HaleSaturday, May 17, 2025 6:47 am ET
118min read

Oracle (ORCL) is sitting on a goldmine of untapped potential that the market has yet to fully recognize. While investors debate whether the company’s cloud transition has already been “priced in,” a deeper dive into its Q3 2025 results reveals a stark disconnect between Oracle’s accelerating growth catalysts and its current valuation. With cloud revenue surging 23%, Remaining Performance Obligations (RPO) skyrocketing 62%, and AI-driven partnerships fueling a $130 billion sales backlog,

is positioned to deliver outsized returns for investors who act now.

The Cloud Inflection Point: Growth That’s Just Getting Started

Oracle’s Q3 cloud revenue hit $6.2 billion, up 23% year-over-year (25% in constant currency), driven by a 49% surge in IaaS (cloud infrastructure) revenue. This isn’t just about incremental gains—it’s about dominating the AI infrastructure race. With GPU consumption for AI training up 244% YoY, Oracle is capitalizing on enterprises’ insatiable demand for scalable, secure AI infrastructure. Meanwhile, SaaS revenue grew 9%, with flagship products like Fusion ERP and NetSuite each rising over 16%—a testament to sticky enterprise software adoption.

Critically, Oracle’s cloud momentum is being fueled by strategic investments in AI infrastructure. The company is building a 30,000-GPU cluster with AMD and a 64,000-GPU NVIDIA liquid-cooled cluster, alongside a $100 billion AI initiative (Stargate) with OpenAI and SoftBank. These moves aren’t just about keeping up—they’re about owning the future of enterprise AI.

The $130 Billion RPO Backlog: A Goldmine Ignored by the Market

Oracle’s RPO—a metric reflecting future revenue from signed contracts—jumped to $130 billion, a 62% increase from a year ago. This isn’t just a number; it’s a roadmap to future growth. 31% of this RPO is expected to convert into revenue over the next 12 months, implying a 15% revenue boost in FY2026. Yet Oracle’s stock trades at just 14.5x forward earnings, a valuation that doesn’t reflect this backlog or the accelerating AI tailwinds.

Analysts argue that Oracle’s valuation discounts reflect concerns about execution risks or slowing growth. But these criticisms overlook two critical factors:
1. AI demand is still in its infancy, and Oracle’s partnerships with hyperscalers like OpenAI and Meta ensure it’s positioned to capture the next wave of enterprise AI spend.
2. The $48 billion in Q3 bookings (the largest quarterly sales figure in Oracle’s history) proves demand is outpacing supply, with component shortages expected to ease by early 2026.

Why “Inflection Priced In” is a Myth

Bearish sentiment hinges on the notion that Oracle’s cloud transition is already fully reflected in its stock price. But this ignores three game-changers:
1. Multi-Cloud Dominance: Oracle’s Database MultiCloud revenue surged 92% YoY, with 18 cloud regions operational and 40 more planned. This hybrid cloud strategy gives enterprises unmatched flexibility.
2. AI Integration: The Oracle AI Data Platform—which blends AI models like ChatGPT and Llama with its databases—offers a unique value proposition for enterprises wary of public cloud data risks.
3. CapEx to Revenue Conversion: While Oracle is pouring $16 billion into data centers and AI infrastructure this year, these investments will pay off as RPO contracts convert into recurring revenue.

Risks? Yes—but the Reward Outweighs Them

Skeptics point to Oracle’s 1.5% EPS miss in Q3 and short-term margin pressures from CapEx. However, these are transient issues. Currency headwinds and a one-time $0.03 EPS drag from an investment loss are already baked into the stock. Meanwhile, Oracle’s $100 billion in cash and a 25% dividend hike signal financial strength and confidence.

Buy Oracle Now—The Catalysts Are Clear

Oracle’s valuation is stuck in the past, while its future is bright. With AI adoption accelerating, enterprises are pivoting to Oracle’s secure, high-performance cloud infrastructure. The $130 billion RPO backlog isn’t a one-time boost—it’s a runway for years of growth.

Action Item: Buy Oracle stock at current levels. The shares are trading at a valuation that ignores its AI-driven RPO expansion, cloud dominance, and strategic partnerships. With a 15-20% revenue growth outlook for FY2026-2027 and a dividend yield of 1.1%, Oracle offers both growth and stability.

Final Verdict: Oracle is a Buy

The market underestimates Oracle’s ability to monetize its $130 billion RPO and dominate AI infrastructure. With enterprise AI spending expected to hit $280 billion by 2027, Oracle’s investments in GPU clusters, hybrid cloud, and AI integration are poised to deliver outsized returns. This is a rare opportunity to invest in a cloud leader at a valuation that still reflects old-school software economics. The future is here—and Oracle is ready to seize it.

Invest now before the market catches up.