Shares of enterprise artificial intelligence (AI) giant Oracle (ORCL +0.17%) have surged nearly 74% so far in 2025. The company has benefited from the explosive demand for data center capacity, driven by the rapid expansion of AI infrastructure.
With its market capitalization sitting comfortably at $828.6 billion as of Oct. 6, the question now is whether Oracle can cross the coveted $1 trillion mark by 2028. Here's why this scenario seems highly possible.
Backlog conversion to revenues
Oracle ended the first quarter of fiscal 2026 (which ended Aug. 31) with exceptionally high remaining performance obligations (RPO) of $455 billion, up 359% on a year-over-year basis. The company has contracts with major AI companies, including OpenAI, xAI, Meta Platforms, Nvidia, and Advanced Micro Devices.
NYSE: ORCL
Key Data Points
Oracle currently operates 34 multicloud data centers on Microsoft's Azure, Alphabet's Google Cloud, and Amazon's AWS infrastructure. Multicloud database revenues grew by 1,529% year over year in the first quarter. Since the hybrid cloud strategy appears to be working with enterprise customers, the company plans to build an additional 37 multicloud data centers by the end of fiscal 2026. The rapid capacity expansion highlights the company's plan to convert its record pipeline into revenue-generating workloads.
Management expects Oracle Cloud Infrastructure (OCI) revenues to jump 77% year over year to $18 billion in fiscal 2026 and become $73 billion in fiscal 2028. The overall cloud business accounted for nearly 48% of the company's total revenues in the first quarter. If Oracle successfully converts its backlog into revenues as projected, we can expect the overall cloud mix to exceed 50% of the company's total revenues. The improved revenue mix will translate into higher profit margins, which can help expand its valuation multiples and lead to higher share price gains.
AI Database
Oracle's recently launched AI Database can also prove to be a significant catalyst for the company's next phase of growth. This database can vectorize enterprise data (converting it into numbers or using algorithms to be stored and accessed efficiently), so that large language models can accurately process and reason over this data. It also allows secure connections with leading large language models.
These capabilities have opened up a massive inferencing opportunity for Oracle, as enterprises will increasingly opt to run complex AI models on proprietary datasets in a secure environment. Since Oracle is already the largest custodian of high-value private enterprise data worldwide, the AI database will further drive AI adoption among its clients.
Oracle is already a dominant player in the multitrillion-dollar AI training market. However, management expects the inferencing opportunity to prove even bigger than the training one.
Capacity expansion
Demand for Oracle's cloud infrastructure exceeds the available supply. Hence, the company has planned nearly $35 billion in capital expenditures (capex) for fiscal 2026, primarily for revenue-generating equipment in data centers. The company is already seeing customers consuming data center capacity within weeks of delivery. The urgency of AI demand and clear monetization potential further increase investor confidence.
Maintaining balance sheet strength
Oracle ended the first quarter with $11 billion in cash and marketable securities, $12 billion in short-term deferred revenue, and a strong operating cash flow of $8.1 billion. While free cash flow was temporarily negative due to heavy capex, this may soon improve as capacity deployments and backlog translate into billable workloads.
The company expects revenues to grow year over year by 16% in constant currency, and operating income to grow in the mid-teens percentage in fiscal 2026. The company is guiding for even stronger operating income growth in fiscal 2028.
Oracle's total debt was at $94 billion at the end of the first quarter. The company has also issued an additional $18 billion in bonds in late September, resulting in a pro forma debt load of approximately $112 billion. However, despite the high debt, Oracle still holds investment-grade credit ratings of Baa2 from Moody's and BBB from S&P Global.
Can Oracle enter the $1 trillion club?
To reach a market capitalization of $1 trillion in 2028, Oracle's market cap must increase by almost 21% (at the time of this writing). This is an achievable target if Oracle manages to convert backlog into revenue rapidly, bring new data center capacity online, and push adoption of its AI database.
Oracle must also combine its growth momentum with tight financial discipline. The company should focus on reducing leverage while also improving profitability and free cash flows.
In such a scenario, the company may easily maintain its elevated forward price-to-earnings (PE) ratio of 36.6x. Analysts expect the company's non-GAAP (generally accepted accounting principles) earnings per share (EPS) to be around $11.2 in fiscal 2028. This translates into a share price of around $409.9, which is over 40% higher than its close of $291.6 (on Oct. 6).
Hence, it is highly plausible for Oracle to enter the $1 trillion club by 2028.
