Meet the Monster Stock That Continues to Crush the Market

Oracle (ORCL -1.33%), the world's largest database-software company, was once considered a slow-growth tech stock. But over the past five years, its stock soared nearly 400% as the S&P 500 and Nasdaq roughly doubled. Why is this blue chip stalwart crushing the market?

What does Oracle do?

Oracle's core relational databases, which generate most of its revenue, store structured data across rows and columns. They use strict schemas (predefined rules) for their input data, keys, and relationships. These databases are often used in bank ledgers, inventory management systems, and enterprise resource planning (ERP) platforms.

Oracle generates a smaller percentage of its revenue from non-relational databases, which accept a wider range of unstructured data. They don't require the data to be rigidly entered into rows and columns, so they pool the data so it can be read by other apps. This type of database is often used by social media apps and recommendation engines.

A decade ago, most of Oracle's database software was deployed as on-premise applications. However, cloud-based infrastructure platforms, like Amazon Web Services (AWS) and Microsoft Azure, which bundled their own database software with their other cloud services, gradually loosened its grip on the market.

To keep pace with that technological shift, Oracle transformed its on-premise database applications into cloud-based services while expanding its own Oracle Cloud Infrastructure (OCI) to challenge AWS and Azure. It also added artificial intelligence (AI)-powered autonomous patching and tuning features to its databases and installed more graphics processing units (GPUs) to process AI tasks. To support that expansion, it acquired dozens of companies -- including the cloud ERP giant NetSuite and the electronic health records (EHR) leader Cerner -- over the past decade.

How did Oracle impress the bulls?

From fiscal 2020 to fiscal 2025 (which ended this May), Oracle's revenue grew at a compound annual growth rate (CAGR) of 8% as its earnings per share (EPS) rose at a CAGR of 7%. That growth was mainly driven by the robust demand for its cloud-based database software and infrastructure services, as well as its acquisitions (especially Cerner in 2022), which inorganically boosted its revenue and profit.

OCI's low cost, strong security features, multicloud partnerships, and integrated AI tools made it a popular alternative to AWS and Azure in the cloud platform market. Oracle's core databases, which already hosted a lot of that data, naturally supported OCI's expansion.

Oracle's cloud-based ERP and human capital management (HCM) services also thrived as more companies shifted their finance and human resource departments to the cloud. That expansion helped the company keep up with newer cloud-based HCM companies like Workday.

Where will Oracle's stock head over the next two years?

Oracle already grew at a steady rate over the past five years, but its growth could accelerate significantly over the next three years. From fiscal 2025 to fiscal 2028, analysts expect the company's revenue and EPS to grow at a CAGR of 27% and 28%, respectively.

The company expectsthat acceleration to be supported by the AI market's expansion, which has already driven companies like OpenAI, xAI, and Meta Platforms to sign big cloud deals with OCI. Oracle also still hosts the data of TikTok's U.S. users on OCI and will likely become one of TikTok's top investors once its parent company ByteDance complies with the Trump Administration's demand to reduce its ownership stake.

In its latest quarter, Oracle predicted OCI's revenue would surge 77% to $18 billion in fiscal 2026 (27% of its projected revenue) before surging to $32 billion in fiscal 2027, $73 billion in fiscal 2028, $114 billion in fiscal 2029, and $144 billion in fiscal 2030. That jaw-dropping forecast propelled Oracle's stock to its record closing price of $328.33 on Sept. 10 -- and enabled Larry Ellison, the company's co-founder and chairman, to briefly eclipse Elon Musk as the world's richest man.

At $292 per share, Oracle's stock isn't cheap at 60 times this year's earnings. But assuming it matches analysts' near-term expectations but its forward multiple cools off to 40 times earnings, its stock could still rise 25% to $364 by the start of fiscal 2028 (June 2027). That could keep it ahead of the S&P 500, which has generated an average annual return of 10% since its inception, but it probably won't replicate its dizzying gains from the past few years.