There's no denying the trajectory of artificial intelligence (AI) over the past few years. Many of the companies that have pivoted to adopt this game-changing technology have ascended the ranks of the world's largest companies when measured by market cap. When the stock market closed on Tuesday, there were 11 members of the vaunted $1 trillion club, the vast majority of which have significant ties to AI.
After the market close, industry stalwart Oracle (ORCL +4.75%) reported its recent quarterly results, and despite missing Wall Street's expectations, the stock surged higher and never looked back. Why? In a stunning turn of events, the company signed numerous multibillion-dollar contracts that kicked its future growth potential into overdrive.
Given the magnitude of these deals, it seems the writing is on the wall for Oracle to join this elite fraternity. The company's growth is at a tipping point, and management's commentary suggests the company has a long AI-centric runway for growth ahead.
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A trusted partner
Oracle holds a coveted place in the technology community, as roughly 98% of Global Fortune 500 companies make up its customer rolls. The industry stalwart provides its customers with a strategic combination of cloud, database, and enterprise software. Naturally, when the shift to AI began in earnest, this captive audience began to turn to Oracle for its expanding collection of cloud and AI solutions.
The company's growth has been uneven, but the future looks bright. During Oracle's fiscal 2026 first quarter (ended Aug. 31), total revenue grew 11% year over year to $14.9 billion, while its adjusted earnings per share (EPS) of $1.47 grew by 6%. Both numbers accelerated compared to Q4, but missed Wall Street's consensus estimates, which called for revenue of $15 billion and adjusted EPS of $1.48.
However, that wasn't the headline. Last quarter, CEO Safra Catz noted that the company had reached a "tipping point," noting that revenue growth was accelerating, "and it's only going up from here."
That turned out to be an understatement. Oracle reported explosive growth in its remaining performance obligation (RPO) -- or contractual obligations not yet included in revenue -- which skyrocketed 359% year over year to $455 billion, up from $138 billion in Q4.
Catz explained, "We signed four multibillion-dollar contracts with three different customers in Q1," calling the results "astonishing." He went on to say that demand for Oracle Cloud "continues to build." The company expects to sign "several additional multi-billion-dollar customers and RPO is likely to exceed half a trillion dollars."
Looking to the future, Oracle is forecasting Oracle Cloud Infrastructure revenue to grow 77% to $18 billion this year -- but that's just the beginning:
- Fiscal 2027 cloud revenue of $32 billion, up 78%.
- Fiscal 2028 cloud revenue of $73 billion, up 128%.
- Fiscal 2029 cloud revenue of $144 billion, up 97%.
Mind you, this is just Oracle Cloud Infrastructure revenue, and Catz noted that "most of the revenue in this five-year forecast is already booked in our reported RPO." That means that any future contracts will probably increase those growth targets.
NYSE: ORCL
Key Data Points
The path to $1 trillion just got much shorter
Oracle is leveraging its position as a trusted partner to help customers choose suitable AI and cloud solutions and profit from the growing adoption of generative AI.
Before today's results, Wall Street was expecting Oracle to generate revenue of $66.75 billion in its fiscal 2026 (which began June 1), giving it a forward price-to-sales (P/S) ratio of about 10. Assuming its P/S remained constant, Oracle needed to generate revenue of approximately $98 billion annually to support a $1 trillion market cap. Given those figures, Oracle could have achieved a $1 trillion market cap before 2028.
Wall Street hasn't yet had time to update its models, but given the magnitude of the company's results, previous forecasts are out the window. Barring unforeseen circumstances, I predict Oracle will join the $1 trillion club within the next 12 months.
Estimates regarding the market potential of generative AI continue to ratchet higher. Big Four accounting firm Price Waterhouse Coopers (PwC) calculates the opportunity could be worth as much as $15.7 trillion annually by 2030, which illustrates the magnitude of the opportunity.
Given the recent contract wins, Oracle has proven that it is leveraging its experience to profit from this windfall. The writing is on the wall, and Oracle is poised to join the fraternity of trillionaires in short order.
