Since the close of trading last Friday, shares of the cloud giant Oracle (ORCL -2.18%) had ripped close to 35%, as of 1:06 p.m. ET on Sept. 11. Earlier this week, Oracle reported earnings for its first fiscal quarter of 2026 (ending Aug. 31) that blew away Wall Street.
"Absolutely staggering"
It's not common to see a stock with a market cap worth several hundred billion dollars make such a big move, but Oracle's earnings results left Wall Street analysts stunned and sent the stock soaring to its best day since 1992.
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While the company posted strong earnings and year-over-year revenue growth of 12%, the number that caught everyone's attention was the company's remaining performance obligations (RPOs), which are cloud contracts the company has committed to delivering but that have yet to be recognized as revenue.
Oracle reported RPOs of $455 billion, up 359% year over year. The company is now projecting $18 billion of cloud infrastructure revenue in fiscal 2026, which would be up from about $10 billion in fiscal year 2025.
The cloud infrastructure business provides capacity to companies through its specialized data centers, which are tailored to run large language models powering artificial intelligence. Oracle signed four multibillion-dollar deals in the first quarter and expects several more to materialize over the next few months.
Management then expects cloud infrastructure revenue over the next four fiscal years to climb exponentially to $32 billion, $73 billion, $114 billion, and $144 billion, respectively. D.A. Davidson analyst Gil Luria noted that this would be a tenfold increase over the next five years, calling the projections "absolutely staggering."
The stock may need a breather
Oracle knocked it out of the park on its recent earnings report, and the company is clearly well positioned to take advantage of the AI revolution. However, after such a big run, the stock now trades at 45 times forward earnings, well beyond what it traded at over the past five years.
Making revenue projections four years out can be difficult, so now might be the time for investors to take a breather and see how cloud infrastructure revenue shapes up in the coming quarters. If you want to buy the stock and take advantage of recent momentum, I'd recommend dollar-cost averaging to smooth out your cost basis over time.
