Oracle’s AI Pipeline Expands: Can Continued Growth Be Expected?

Oracle's AI Backlog Fuels Growth Prospects

Oracle’s expanding backlog, driven by artificial intelligence initiatives, is enhancing the company’s growth trajectory and providing greater clarity for future revenues. In the second quarter of fiscal 2026, the company’s Remaining Performance Obligations (RPO) saw a significant year-over-year increase, underscoring strong AI-related demand from major enterprise clients. Notably, RPO expected to be recognized within the next year surged by 40%, signaling robust short-term revenue prospects and bolstering confidence in Oracle’s ongoing momentum.

Cloud Services Lead Revenue Expansion

Cloud operations remain at the heart of Oracle’s growth. Cloud revenue for the quarter soared 34% compared to the previous year, reaching $8 billion and accounting for roughly half of total company revenues. This marks a successful transition toward recurring, AI-powered income streams. The Cloud Infrastructure segment was particularly strong, propelled by heightened GPU requirements and rapid adoption of multi-cloud database solutions. These developments indicate that Oracle’s AI investments are now translating into tangible revenue gains.

Looking ahead, management anticipates an additional $4 billion in revenue for fiscal 2027, directly linked to newly signed AI contracts. The revenue outlook for fiscal 2026 remains steady at $67 billion, reflecting solid contractual demand and forward visibility.

Oracle is strategically aligning its capital expenditures with contracted demand, focusing on infrastructure that directly supports revenue growth and meets defined return criteria. This disciplined approach helps prevent overbuilding while enabling scalable AI expansion.

With artificial intelligence integrated throughout its infrastructure, databases, and applications, Oracle is well-placed to capture increasing enterprise AI demand and sustain multi-year growth. Current consensus estimates from Zacks project Oracle’s total revenue to rise by 16.6% in fiscal 2026 and by 27.6% in fiscal 2027, supporting the outlook for continued expansion.

Comparing Oracle’s AI Backlog with Industry Leaders

While Oracle is making significant strides in AI infrastructure, it faces stiff competition from hyperscale providers such as Amazon and Salesforce.

• Amazon (AMZN): Amazon’s AWS division poses a major challenge for Oracle in the AI infrastructure space. AWS has reached an annual revenue run rate of $142 billion, fueled by a substantial AI-driven backlog and growing enterprise demand. Amazon’s proprietary chips, including Trainium and Graviton, enhance both cost efficiency and AI performance. Although Oracle benefits from a loyal database customer base and rising RPO, Amazon’s scale and aggressive AI investments intensify the competitive landscape.
• Salesforce (CRM): Salesforce primarily competes with Oracle in the realm of AI-powered applications. The company reported $72 billion in RPO, indicating strong backlog visibility. Salesforce’s Agentforce platform is rapidly expanding, with increased enterprise adoption and significant government contracts. While Oracle’s focus is on AI infrastructure, Salesforce integrates AI into its core applications to streamline workflows, highlighting the different strategies among leading software providers.

Oracle’s Stock Performance, Valuation, and Outlook

Over the past six months, Oracle’s share price has dropped by 33.4%, lagging behind the Zacks Computer and Technology sector’s 7.6% growth and the Computer - Software industry’s 24.6% decline.

Six-Month Stock Performance

Image Source: Zacks Investment Research

From a valuation perspective, Oracle’s stock is trading at a forward 12-month price-to-earnings ratio of 18.81, which is below the industry average of 21.79. The company currently holds a Value Score of D from Zacks.

Valuation Overview

Image Source: Zacks Investment Research

The consensus estimate for Oracle’s fiscal 2026 earnings stands at $7.45 per share, a slight decrease of one cent over the past month. This projection represents a 23.55% increase over fiscal 2025’s reported earnings.

Image Source: Zacks Investment Research

Currently, Oracle is rated as a Zacks Rank #3 (Hold).

The Next Phase of AI: Opportunities Beyond the Big Names

While the first wave of AI has already created significant wealth, the most well-known stocks may not offer the highest returns going forward. Emerging AI companies addressing major global challenges could present more lucrative opportunities in the near future.