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Oracle (ORCL) has consistently demonstrated strong performance in the stock market over the past five years, boasting impressive gains of 230%, significantly surpassing the Nasdaq Composite, which increased by 143%. However, the technology powerhouse has faced challenges in 2025.
As of now, the company’s shares have experienced a 7% decline this year, mirroring the movements of the Nasdaq. Oracle’s third-quarter fiscal report for 2025, which covered the period ending February 28, did not reassure investors; the stock experienced a dip after the earnings release on March 10, although it has since begun to recover.
The company’s growth figures fell short of Wall Street’s expectations, and a pessimistic guidance added to the negative sentiment. Despite this, prudent investors may view the recent dip as a strategic opportunity for investment, given that the company is poised for substantial growth in the future. The potential in the cloud infrastructure market signals that Oracle’s stock could experience significant appreciation over the next five years.
Highlighting Oracle’s Growing Backlog
After the release of its latest financial results, investors reacted swiftly, expressing concerns over Oracle’s performance. The reported 8% year-over-year revenue growth and a 4% increase in adjusted earnings did not align with consensus forecasts, leading to disappointment.
Moreover, the company’s guidance of a 9% revenue increase for the upcoming quarter fell short of the anticipated 11%, further fueling investor concerns.
However, fixating on the short-term outlook could obscure the bigger picture. The strong demand for Oracle’s cloud infrastructure, particularly for artificial intelligence (AI) applications, has resulted in exceptional growth within its backlog.
This is evidenced by a staggering 62% year-over-year growth in Oracle’s remaining performance obligations (RPO), which have reached $130 billion. RPO reflects the aggregate value of contracts yet to be fulfilled and, importantly, this metric outpaced the company’s overall revenue growth last quarter.
During the recent conference call with analysts, Oracle’s management indicated that the quarter marked its highest performance in terms of contract bookings, adding $48 billion in new contracts to its backlog. Significantly, Oracle is currently experiencing demand that surpasses its supply capabilities, as companies increasingly turn to its solutions for AI model training and deployment.
Additionally, management highlighted that Oracle’s cloud services are “faster and, therefore, cheaper than our competitors.” This trend of rising demand for Oracle’s cloud infrastructure is poised to remain robust until at least the end of the current decade, with Goldman Sachs estimating that the infrastructure-as-a-service (IaaS) market could generate $580 billion annually by 2030.
The accelerating growth in Oracle’s RPO and its prolific rate of new contract acquisitions indicate that the company is on track to capture a significant portion of this lucrative market. As a result, the rapid increase in Oracle’s RPO is likely to translate into reinforced growth in the coming years.
Looking ahead, Oracle anticipates revenue growth of around 15% for the next fiscal year, followed by an even more impressive 20% increase in fiscal 2027, both of which surpass earlier expectations. Previously, Oracle projected $65 billion in revenues for fiscal 2026 but has since adjusted its outlook to $66 billion.
Furthermore, a 20% growth in fiscal 2027 would elevate Oracle’s revenue to over $79 billion, exceeding current analyst predictions.
ORCL Revenue Estimates for Current Fiscal Year data by YCharts
Investors should recognize that Oracle may very well surpass its projections in the long run, given the rapid pace of its data center capacity expansion to meet surging demand. Management plans to double data center capacity in the current fiscal year and triple it by the end of the next fiscal year.
This growth in data center capacity will enable Oracle to fulfill a larger portion of its RPO, potentially driving significant increases in the company’s profits.
Promising Profit Growth Indicates Positive Stock Performance Ahead
In September of last year, Oracle forecasted that its earnings could achieve an annual growth rate exceeding 20% through fiscal 2029. However, insights from the recent earnings call suggest that there is potential for even better performance.
If Oracle can achieve a 25% annual growth rate in earnings over the next five years, its earnings per share could reach $18.31 by fiscal 2030, based on its projected earnings of $6.00 per share for fiscal 2025. Currently, Oracle trades at a multiple of 21 times forward earnings, which is lower than the tech-centric Nasdaq-100 index’s forward earnings multiple of 25.
If the market assigns a higher valuation to Oracle and it trades at a 25 times earnings multiple in five years, this would imply a stock price of $458, representing an increase of 197% from its current level.
Investors are encouraged to consider adding this AI-focused company to their portfolios, particularly after its recent price drop. Oracle not only appears to be attractively valued at present, but it also holds significant potential for long-term appreciation.
Source
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