Good day, fellow investors. Oracle Corporation (ticker symbol: ORCL) just reported its latest earnings, and the results have the stock soaring over 7% in after-hours trading — a move that's holding steady and suggests strong underlying momentum. But what exactly is driving this rally? Is it sustainable? What do the numbers really tell us about Oracle’s business transformation and its positioning in the broader AI and cloud infrastructure boom? And most importantly: should Oracle be on your buy list right now?
Let’s break it all down — from the earnings headline figures to the long-term outlook, valuations, and technical setup. If you find value in deep-dive analysis like this, please consider subscribing, hitting the like button, and leaving a comment — it really supports the work and helps spread sound investing insights. Now, let’s dive in.
Earnings Overview : A Double Beat and Promising Growth Story
Oracle delivered a solid quarter that exceeded Wall Street expectations. The company beat on both the top and bottom lines, with revenue growing 11% year-over-year and earnings per share up 9%. These results came despite some cost pressures and a growing interest burden. Net income rose from $3.1 billion to $3.4 billion, while profit margins held relatively steady — no small feat in today’s high-cost environment.
Free Cash Flow
There was a notable decline in free cash flow margin, which dropped from 22.9% to negative 2%. On the surface, that might raise some red flags. However, this drop is largely attributable to Oracle’s significant capital expenditures, particularly as the company aggressively builds out its cloud infrastructure footprint. In other words, the decline is due to strategic reinvestment, not operational deterioration. Net income is a more reliable indicator of performance this quarter, and it’s moving in the right direction.
Gross margins did decline slightly, but this was mostly due to one-time charges — not a systemic issue. Importantly, the market shrugged off these minor negatives, zeroing in instead on the stronger signals embedded in the report.
Balance Sheet Health: A Leverage Risk Worth Monitoring
That said, not everything is rosy. One of the most concerning data points from the report is Oracle’s hefty $109 billion debt load, which far outweighs its $17.8 billion in cash. That’s a significant amount of leverage, and with interest expenses now approaching $1 billion per quarter, the cost of that debt is becoming a real headwind — especially in a higher-for-longer rate environment.
Oracle’s large debt load is a clear risk factor. However, if interest rates begin to ease later this year or into 2026, as some expect, the burden could start to decline. Much of Oracle’s debt is fixed-rate and long-term, which gives the company some breathing room, but it's still something to watch closely. High leverage limits optionality and puts a cap on shareholder returns through buybacks or dividends, especially during heavy investment cycles like the one we're seeing now.
What Oracle Actually Does — and Why It Matters in 2025
Now, for those less familiar: Oracle designs and sells enterprise software and hardware, and provides services that support those offerings — including financing, training, consulting, and cloud hosting. Its product suite has grown significantly over the years through strategic acquisitions. One major differentiator is Oracle’s powerful software stack — including its CRM solution, Siebel Systems, which many large corporations rely on heavily. In fact, as an accountant, I use Oracle's software daily, and I can attest to how deeply embedded it becomes in company operations. Once implemented, switching becomes incredibly costly and time-consuming — which speaks to the strength of Oracle’s customer retention and the “stickiness” of its business model.
More recently, Oracle has focused heavily on building out its cloud division, with two primary segments:
-
Cloud Applications (SaaS)
-
Cloud Infrastructure (IaaS), competing directly with Microsoft Azure, Amazon Web Services, and Google Cloud.
They also dominate in relational database management systems (RDBMS), an area they practically invented and still lead. A fascinating footnote in Oracle’s origin story — the company was originally started by Larry Ellison while working on a CIA project also named “Oracle.” Even today, the company maintains deep ties to government clients, and a significant portion of its revenue comes from public sector contracts. Ellison himself reportedly still holds security clearance — which underscores just how closely tied Oracle remains to national infrastructure, cybersecurity, and intelligence systems.
Growth
Digging deeper into the numbers, total revenue grew by 11.3%, with cost of revenue increasing 12.4%, and interest expenses rising 11%. That explains why net income grew at a slightly slower pace — up just 9% — despite double-digit top-line growth. Interest costs alone, which now approach $1 billion per quarter, are taking a sizable bite out of profitability.
But here’s where things get really interesting — Oracle’s remaining performance obligations (RPO), essentially future contracted revenue, grew an astounding 41% year-over-year, reaching $138 billion. This is a critical metric for cloud businesses, and it’s growing at breakneck speed.
Even more impressive, cloud infrastructure revenue jumped 52%, while total cloud revenue (apps + infra) climbed 27%. This kind of acceleration in high-margin segments is exactly what the market wants to see.
And Oracle didn’t stop there — management offered extremely bullish forward-looking commentary for FY2026, suggesting that growth will actually accelerate from here.
From their own statement:
“We expect our total cloud growth rate (applications + infrastructure) will increase from 24% to over 40% in FY26. Cloud infrastructure alone is expected to grow more than 70%. RPO is likely to more than double.”
They also noted plans to double their multicloud data center footprint, with 47 new facilities under construction to complement their existing 23 centers. That’s a staggering pace of expansion.
Why the Stock Is Rallying — and What the AI Trade Has to Do With It
So why is the stock up 7% despite a mixed free cash flow figure and high debt levels? The answer lies in Oracle’s positioning in the AI and cloud computing boom. AI workloads are driving massive demand for cloud infrastructure, and Oracle is now positioned as a serious competitor to AWS, Azure, and GCP in this space.
Demand for Oracle Cloud Infrastructure (OCI) grew 62% in Q4 alone, and management expects OCI revenue growth to accelerate even further in FY26. With the AI revolution still in its early innings, Oracle’s data-centric, secure, high-performance cloud architecture is becoming increasingly appealing to both government and enterprise customers.
When you get a double beat on earnings, paired with guidance suggesting future growth will be dramatically stronger, that’s exactly what Wall Street wants to hear. The reaction makes perfect sense.
Valuation and Outlook: Still Room to Run?
Let’s look at valuation. Oracle currently trades around 24x earnings and 16x EV/EBITDA. That’s not exactly cheap, but for a business growing its highest-value segments at 50–70% annually, it’s hardly expensive either. Importantly, Oracle has historically been a buyback machine, repurchasing nearly 42% of its shares over the last decade. That pace has slowed recently — just $150 million in buybacks last quarter — due to higher capex. But once that investment cycle normalizes, expect repurchases to ramp again.
Based on a conservative forecast — assuming 13% annual revenue growth and EBITDA margins staying stable at 41% — a reasonable EV/EBITDA multiple of 18x would yield an enterprise value that supports a 2029 share price of around $243, up from today’s post-rally price of about $188. Accounting for net debt and dilution, that implies a 5.35% CAGR, though with a more bullish multiple or better margin leverage, you could reasonably target double-digit returns.
If Oracle can maintain this growth pace while paying down debt or boosting cash flow, the long-term upside is considerable — especially as AI infrastructure becomes a pillar of enterprise technology.
Technical Analysis: A Pullback Opportunity?
Looking at the technicals, Oracle has historically respected its 200-day moving average. Each time it has pulled back to this level — including several points over the past year — the stock has rebounded strongly. After retesting and reclaiming that moving average, the stock is now back in breakout territory.
If the stock does pull back again toward that key technical level, it could offer a compelling buy-the-dip opportunity — particularly with such strong earnings to support the move. All signs suggest Oracle could challenge its all-time highs in the coming months.
Conclusion: Should You Buy Oracle Now?
To summarize:
-
Oracle delivered a strong earnings beat
-
Cloud and AI segments are accelerating, with cloud infrastructure revenue up 52%
-
Forward guidance was very bullish — management sees growth accelerating
-
The company trades at a reasonable valuation considering its growth trajectory
-
Debt is a concern, but manageable if rates fall or cash flows continue to rise
-
Technical setup suggests a possible breakout or pullback-buy opportunity
For long-term investors looking to gain exposure to the AI infrastructure and enterprise cloud trend, Oracle is making a compelling case. It's not the flashiest stock — but it’s got entrenched software, growing cloud assets, and the potential to scale into a true heavyweight in AI infrastructure.
If you're already holding Oracle, the results reaffirm your thesis. If you're on the sidelines, watch for a possible pullback to the 200-day moving average — that could be your entry point.
Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.
@Daily_Discussion @TigerPM @TigerObserver @Tiger_comments @TigerClub
Comments