The trillion-dollar club keeps getting bigger. Apple became the first U.S.-listed stock to reach a $1 trillion market cap back in 2018. Today, there are a total of 10 companies that have passed the trillion-dollar threshold:
- Nvidia: $4.36 trillion
- Microsoft: $3.86 trillion
- Apple: $3.82 trillion
- Alphabet: $3.05 trillion
- Amazon: $2.32 trillion
- Meta Platforms: $1.84 trillion
- Broadcom: $1.6 trillion
- Taiwan Semiconductor: $1.23 trillion
- Tesla: $1.37 trillion
- Berkshire Hathaway: $1.06 trillion
Only a handful of companies are trading between $500 billion and $1 trillion in market cap, meaning the list of contenders to join the elite club is shorter than you might expect. But one tech giant looks poised to gain admission.
That's Oracle (ORCL 4.07%), the legacy tech company that has become a major player in artificial intelligence (AI), thanks to its strength in database software, security, and cloud infrastructure. As of Oct. 22, the company has a market cap of $781 billion, meaning it would need to gain about 28% to make it to $1 trillion. Oracle did come close to that market cap in September (topping out at $982 billion), though the stock price has faded since then.
Image source: Getty Images.
What's happening with Oracle?
Oracle stock has skyrocketed in the AI era as the company emerged as a valuable cloud infrastructure partner, growing faster than the big three, meaning Amazon Web Services (AWS), Microsoft Azure, and Google Cloud.
Oracle stock has jumped more than 300% over the last three years, and its prospects in AI continue to grow more promising as demand for its cloud computing service has greatly exceeded its capacity.
Its first-quarter earnings report blew investors out of the water, and there was one figure in particular that showed where the company was headed. Management said that its remaining performance obligations jumped 359% to $455 billion in the quarter. Then-CEO Safra Catz explained, "We signed four multibillion-dollar contracts with three different customers in Q1," which led to the contract backlog.
Cloud infrastructure revenue rose 55% to $3.3 billion, which was a fraction of the company's total revenue at $14.9 billion. However, Oracle is seeing new revenue streams emerge. Multicloud database revenue from Amazon, Google, and Microsoft jumped 1,529% in the first quarter.
Management expects multicloud revenue to grow substantially for several years as it continues to expand its data center footprint. The multicloud partnerships are appealing to the company because they allow end users to run Oracle's database software within their respective cloud ecosystems.
Perhaps the most impressive part of Oracle's earnings report was its forecast calling for cloud infrastructure revenue to jump from $18 billion this fiscal year to $144 billion in fiscal 2030.
NYSE: ORCL
Key Data Points
Oracle's path to $1 trillion
With a market cap of $780 billion, Oracle doesn't have too much further to go to get to $1 trillion. While investors might think the upside potential is priced in after that forecast, Oracle's valuation is a bit inflated, trading at a price-to-earnings ratio of 63, but it is on par with other tech titans like Microsoft, Nvidia, and Apple.
If Oracle's cloud infrastructure revenue reaches $144 billion by 2030, that's more than double Oracle's annual revenue today, meaning it will at least triple over the next five years if that forecast is correct.
In response to doubts about margins from cloud infrastructure, the company said it expected an adjusted gross margin of 30% to 40%, which is lower than the rest of the business, but still strong enough to deliver meaningful profits on the bottom line.
The AI boom is still picking up steam, and if that pattern continues, Oracle looks like a great bet to reach $1 trillion in market cap next year.
