Oracle (ORCL +0.79%) released its fiscal 2026 first-quarter results (for the three months ended Aug. 31) on Sept. 9, and it wasn't surprising to see the cloud infrastructure giant's stock jump a whopping 36% the following day.
The booming demand for cloud infrastructure capable of handling artificial intelligence (AI) workloads has been helping Oracle build a robust long-term revenue pipeline. The company's latest quarterly results made it clear that it is indeed one of the greatest beneficiaries of the rapidly growing adoption of AI, and that's the reason why investors bought this cloud stock hand over fist.
Oracle stock has jumped 81% in 2025 following its latest surge. It now has a market cap of $856 billion. But if you've missed the stock's terrific surge, you can still consider buying it as it has the ability to hit $3 trillion in market cap within the next five years. Let's see why.
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Oracle's $455 billion backlog can power a big surge in the stock price
Oracle's revenue in the quarter jumped 12% year over year to $14.9 billion. However, the company surprised everyone by reporting a 359% spike in its remaining performance obligations (RPO) to a humongous $455 billion. RPO is the total value of Oracle's contracts that are yet to be fulfilled at the end of a period. The stunning increase in this metric is going to pave the way for stronger growth in the company's business.
NYSE: ORCL
Key Data Points
Oracle's phenomenal RPO growth was driven by "significant cloud contracts with the who's who of AI, including OpenAI, xAI, Meta Platforms, Nvidia, Advanced Micro Devices, and many others." These are just some of the names that have been tapping Oracle's data center capacity to train and deploy AI models, applications, and services in the cloud.
It is easy to see why Oracle is winning business from so many AI and cloud companies. The company points out that its Oracle Cloud Infrastructure (OCI) can help customers reduce AI compute costs by up to 50% and networking costs by up to 80%. Additionally, Oracle built (and is still building) a huge data center network across the globe, which is another reason why it is landing a huge volume of AI contracts.
The company operates 34 multicloud data centers along with Amazon, Alphabet's Google, and Microsoft. It expects to take that number to 71, pointing out that its multicloud revenue will "grow substantially every quarter for several years." In all, Oracle's data centers are spread across 50 regions around the world, and it offers more than 150 OCI services in each region.
This wide reach, coupled with Oracle's competitive pricing and the need for AI infrastructure, is the reason why the company is anticipating an acceleration in its OCI revenue going forward. As pointed out by CEO Safra Catz in the earnings release: "As a bit of a preview, we expect Oracle Cloud Infrastructure revenue to grow 77% to $18 billion this fiscal year -- and then increase to $32 billion, $73 billion, $114 billion, and $144 billion over the subsequent four years. Most of the revenue in this five-year forecast is already booked in our reported RPO."
However, don't be surprised to see Oracle revise these forecasts upward. That's because the company expects to sign several more multibillion-dollar contracts in the coming months, which will take its RPO beyond $500 billion. This, in turn, could help Oracle become a $3 trillion company in the next five years.
Why a $3 trillion market cap seems achievable by 2030
We have already seen that Oracle management is expecting its OCI revenue to jump to $144 billion by fiscal 2030. But as the company is confident of landing more AI contracts, that figure could end up being higher than management's current forecast. Another thing worth noting is that analysts have significantly increased their growth expectations.
ORCL Revenue Estimates for Current Fiscal Year data by YCharts
Oracle's revenue growth is expected to accelerate significantly by fiscal 2028, driven by the growing momentum of OCI. Considering that Oracle is currently forecasting its OCI revenue to grow by another $71 billion between fiscal 2028 and fiscal 2030 (as evident from the CEO's statement), its top line could jump to $185 billion after five years (assuming it doesn't land any more contracts and its other business segments remain constant).
But as the company is likely to land more contracts and is witnessing healthy double-digit growth in its cloud-based enterprise resource planning (ERP) business, there is a good chance that its annual revenue could end up at $200 billion after five years.
Oracle currently has a price-to-sales ratio of almost 15. That's a premium to the U.S. technology sector's average sales multiple of 8.6. However, Oracle's premium is justified by its $455 billion pipeline that's going to help accelerate its growth. A similar multiple after five years should be enough to take Oracle's market cap beyond the $3 trillion mark, suggesting that this AI stock has the potential to deliver stunning gains by 2030.
