Brief Summary

Oracle reported a staggering 359% growth in Remaining Performance Obligations (RPO), far exceeding Wall Street’s 180% expectation, signaling robust demand for AI and cloud services. This massive backlog suggests a projected 70% CAGR through fiscal 2030, reflecting confidence in sustained revenue growth over the next few years. While profitability remains unclear, current margins stand at an impressive 41.5%. Analysts note this reaffirms AI spending momentum, despite high capital expenditures (CapEx) rising from under $2 billion in 2020 to over $21 billion last year. Investors continue to bid the stock up 27.5% in a single session, though concerns linger about long-term CapEx impacts.

The big picture

• Oracle’s transformation focuses on a wider revenue base, potentially at lower margins, while competing with trillion-dollar tech giants.
• AI demand drives significant backlog growth, shifting market narratives from slowdown concerns to reaffirmed spending for the next five years.
• Stock valuations in the AI sector remain higher than long-term averages, with markets currently unfazed by escalating CapEx.
• Rotation in AI investments is evident, moving from semiconductors to software and power generation sectors.

Driving the news

• Oracle reported a 359% growth in Remaining Performance Obligations (RPO), surpassing Wall Street’s 180% growth expectation.
• Oracle’s stock surged 27.5% in a single session, following the RPO announcement, despite missing earnings and revenue targets.
• Oracle’s stock has risen 40% since June, reflecting strong investor confidence leading into this quarter.
• Oracle integrates Google Gemini into its cloud infrastructure, positioning itself against major tech competitors.
• Analysts note Oracle’s CapEx increased from under $2 billion in 2020 to over $21 billion last year to support AI demand.

Zoom out

• Oracle was not previously considered a primary AI investment among retail and institutional investors, unlike more obvious tech names.
• Recent trends show a rotation in AI investment focus, as seen with companies like Broadcom, expanding beyond semiconductors.

What they’re saying

• “This is a stratospheric number; even half of that would still be extraordinary.” — Unnamed commentator, Analyst
• “Visibility of almost 70% CAGR out to fiscal 2030 is astounding.” — Unnamed commentator, Analyst
• “Yesterday’s narrative was ‘Is AI adoption slowing?’ and today we have massive forecasts reaffirming AI spend.” — Unnamed commentator, Analyst

By the numbers

• 359% growth in Remaining Performance Obligations (RPO) reported by Oracle.
• 70% projected Compound Annual Growth Rate (CAGR) through fiscal 2030.
• 41.5% current profit margin for Oracle.
• Capital Expenditure (CapEx) rose from under $2 billion in 2020 to over $21 billion last year.
• 27.5% stock price increase for Oracle in a single session.

What to watch

• Future profitability metrics for Oracle, as current figures remain undisclosed despite high growth.
• Long-term impact of rising CapEx on Oracle’s valuation and market perception in the AI sector.
• Continued momentum in AI investment rotation toward software and power generation sectors.

Evidence Table