It would be difficult to overstate the impact of artificial intelligence (AI) on the technology landscape over the past few years. In fact, many of the world's most valuable companies by market cap have joined the $1 trillion club, riding the wave of AI to new heights. Thus far, however, only five companies can boast valuations of $2 trillion or more, and all have undeniable links to AI.
With a market cap of just $899 billion, it might seem premature to say Oracle (ORCL 3.63%) is on track for membership in this select group. Yet the company's growth has begun to accelerate, and management's long-term outlook strongly suggests that AI will drive robust growth for the remainder of the decade.
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It's well documented that Oracle counts about 98% of Global Fortune 500 companies as customers, many of whom use a combination of its cloud, database, and enterprise software products, along with the associated ancillary services. These same users represent a target market for Oracle's growing suite of cloud and AI solutions.
This captive audience and strong demand have helped fuel an undeniable growth spurt. For Oracle's fiscal 2026 first quarter (ended Aug 31), revenue grew 12% year over year to $14.9 billion, while its adjusted earnings per share (EPS) of $1.47 grew 6%, with both metrics accelerating quarter over quarter.
The headline metrics fell short of Wall Street's consensus estimates, which called for revenue of $15 billion and adjusted EPS of $1.48.
Beyond the headline numbers, however, Oracle had a surprise in store for investors. The company's remaining performance obligation (RPO) -- commonly called backlog -- surged 359% to a record $455 billion. The company cited several multi-billion-dollar contracts consummated during the quarter. That's not all. CEO Safra Catz turned heads when she said, "We expect to sign up several additional multi-billion-dollar customers and RPO is likely to exceed half a trillion dollars."
Oracle Cloud Infrastructure (OCI) -- a cloud competitor to Amazon Web Services, Alphabet's Google Cloud, and Microsoft Azure -- grew 51% year over year and the company is forecasting impressive growth in the years to come:
- Fiscal 2027 cloud revenue increasing 78% to $32 billion
- Fiscal 2028 cloud revenue increasing 128% to $73 billion
- Fiscal 2029 cloud revenue increasing 56% to $114 billion
- Fiscal 2030 cloud revenue increasing 26% to $144 billion
These numbers suggest that the "Big Three" cloud providers might be rebranding as the "Big Four" in the very near future.
NYSE: ORCL
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The clear path to $2 trillion
Oracle has an impeccable reputation when it comes to steering customers toward the cloud and AI solutions best suited to their needs. As a result, the company is well-positioned to benefit from the rapid migration to generative AI. Given the sheer magnitude of this evolving opportunity, it will likely take years, if not decades, before the transition is complete.
According to Wall Street, Oracle is expected to generate revenue of $67 billion in its fiscal 2026 (which began Jun. 1), giving it a forward price-to-sales (P/S) ratio of about 13. Assuming its P/S remains constant, Oracle will need to generate revenue of approximately $149 billion annually to support a $2 trillion market cap. Management's cloud forecast alone puts the company in the ballpark within five years.
Analysts are forecasting revenue growth of nearly 29% annually over the coming five years. If the company achieves these targets, Oracle could achieve a $2 trillion market cap before 2030.
Estimates regarding the size of the AI market continue to ratchet higher. Big Four accounting firm Price Waterhouse Coopers (PwC) estimates the opportunity could be worth as much as $15.7 trillion annually by 2030, which helps underscore the magnitude of the opportunity.
By serving up AI solutions to its long list of clients, Oracle seems well on the way to carving out a piece of the aforementioned windfall. Given its long-range forecast, it seems it's just a matter of time before Oracle joins the elite fraternity of multi-trillionaires.
