Oracle is touting its cloud, offering itself as the go-to destination for AI workloads — and that's before the much-hyped Stargate initiates its liftoff sequence. Oracle stock surged Thursday after the company reported strong fiscal fourth quarter results and said it expects fiscal 2026 revenue to be "dramatically" higher.
Oracle's revenue increased a better-than-expected 11% to $15.9 billion for its May-ended fiscal Q4, the Austin, Texas-based company said late Wednesday. But it was Oracle's guidance for its current May-ending fiscal 2026 that captured investors' imaginations.
Chief Executive Safra Catz said Oracle expects revenue growth will be "dramatically higher," including overall cloud-based growth jumping from 24% this previous fiscal year to 40% in the current one. Catz said Oracle's closely-watched cloud infrastructure business will accelerate its growth to more than 70% in fiscal 2026, compared to the 50% growth it just notched.
"Oracle reported strong F4Q results across the board, including accelerating (infrastructure-as-a-service) growth for the year at 51%, but even more impressive was guidance for the future, as it's benefiting from demand from all directions," Guggenheim analyst John DiFucci wrote in a client note Thursday.
On the stock market today, Oracle stock gained more than 13% to close at 199.86. That marked a record close, just above highs reached late last year before a 40% slide that saw shares bottom out in April.
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Oracle said its remaining performance obligations (RPO) grew 41% to $138 billion during the May quarter. The company expects that backlog will more than double next year as well.
Chief Executive Catz told analysts on a conference call late Wednesday that the backlog gives Oracle confidence it can meet its OCI growth target of 70%.
OCI, or Oracle Cloud Infrastructure, is central to Oracle's push to be an AI leader. The business provides cloud-computing services to enterprises, competing against cloud giants Amazon and Microsoft. Its 50% growth puts it way ahead of the recent growth rates for Amazon Web Services and Microsoft Azure. But its $3 billion in sales last quarter is roughly one-tenth of AWS' Q1 sales.
But Catz said Oracle's cloud is standing out in the heated competition for AI-related business.
"The cloud we built runs faster and has more capabilities than our competitors," Catz said Wednesday. She added that, "We are very much the destination of choice."
Oracle made a big move to establish itself as an AI cloud leader in January. Chairman Larry Ellison appeared at the White House to announce Stargate, a collaboration with OpenAI, SoftBank and others. The project aims to open a series of new data centers focused on AI across the U.S., backed by a private investment pledge of $100 billion that could reach $500 billion by 2029.
But Catz said Stargate is still "in formation" when asked about how much the plan is contributing to Oracle's expected cloud backlog growth.
"As Stargate forms, that will contribute into all of this," Catz said, adding that Oracle is "working with many, many companies right now and (we) have (an) enormous pipeline as a result."
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Guggenheim's DiFucci took that as a potential positive. "It doesn't sound like much if any Stargate contribution is needed to achieve (fiscal year) 2026 growth of more than 70% in (cloud infrastructure)," he wrote. DiFucci reiterated a buy call on Oracle stock.
Meanwhile, Evercore ISI analyst Kirk Materne said OCI is "differentiated" through its smaller data center footprints that allow it to scale up faster. He rates Oracle as outperform and upped his price target for the stock to 215 from 180 in a client note Thursday.
But Materne acknowledged that investors will debate how Oracle can balance that demand with the costs to meet it. Oracle is building new data centers and filling them with advanced computing chips from Nvidia.
"We believe the pros (accelerating revenue and OCI growth) outweigh the cons (lower margins/free-cash-flow and increased capital expenditures), as Oracle is well-positioned to capitalize on cloud/AI demand trends," Materne wrote.
Oracle's capital expenditures jumped from $7 billion in its fiscal 2024 to $21 billion for fiscal 2025. The company expects about $25 billion in capex for its fiscal 2026.
That high cost is keeping some analysts cautious. Stifel's Brad Reback stuck to a hold call for Oracle stock while upping his price target to 180 from 150.
"No question this growth acceleration is positive, but it is coming with a cost as operating income growth is likely to lag revenue growth in coming quarters and the company will probably need to raise capital to fund increased capex needs which potentially limits multiple expansion," Reback wrote Thursday.
Oracle Stock's Recent Rally
Prior to Thursday's jump, Oracle stock had already started a 50% rally from a low reached April 11. Concerns about the company's heightened AI spending and the broader economy weighed on shares earlier this year. Back-to-back earnings letdowns didn't help either.
But strong results from competitors and an easing for U.S. tariffs had boosted investor optimism heading into the report.
Oracle's stock is now showing a "blue dot" on its MarketSurge chart. The blue dot appears when a stock's Relative Strength line reaches a 52-week high and the stock is building a fresh base or breaking out past a buy point. MarketSurge shows Oracle stock breaking out from a long consolidation pattern with a buy point at 198.31.
