Assessing Oracle’s Growth and Investment Potential for 2025

Oracle (NYSE: ORCL) has long been seen as a slow-growth technology giant. Nevertheless, its stock has surged over 260% in the last decade. The company has successfully expanded its cloud services, made strategic acquisitions, and repatriated a substantial amount of overseas cash, allowing it to repurchase over a third of its shares.

With this impressive growth, should investors consider buying Oracle’s stock now? Let’s examine its business model and current valuations.

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Oracle’s Transformation Over the Past Decade

Between fiscal 2014 and fiscal 2024, which concluded last May, Oracle’s revenue exhibited a compound annual growth rate (CAGR) of 3%, while its earnings per share (EPS) grew at a CAGR of 5%. This steady growth coincided with a significant transition toward cloud-based services. Oracle transformed many of its on-premise database applications and expanded its cloud offerings in enterprise resource planning (ERP), healthcare IT, and infrastructure services through strategic acquisitions.

Notable acquisitions included NetSuite, Aconex, and Cerner. These companies enhance Oracle’s subscription offerings and drive more data to its core databases.

Additionally, Oracle developed its own Oracle Cloud Infrastructure (OCI), carving a niche alongside larger competitors like Amazon (NASDAQ: AMZN) Web Services (AWS) and Microsoft (NASDAQ: MSFT) Azure. This includes making its databases compatible with other cloud platforms.

Although this transformation required significant investment, it positioned Oracle well amid the shift from on-premise software to cloud services. The reduction of taxes on overseas profits and the repatriation of cash in 2017 allowed Oracle to bring substantial funds back to the U.S., investing heavily in buybacks and dividends.

Oracle’s Outlook for the Coming Years

Looking ahead to fiscal 2025, Oracle anticipates generating $25 billion in cloud revenue. This figure would account for 43% of its expected total revenue of $57.8 billion for the year. Growth in the AI market is poised to drive this expansion, with more companies increasing investments in database and OCI services.

Prominent AI clients already include Nvidia (NASDAQ: NVDA), Meta Platforms (NASDAQ: META), OpenAI, xAI, and Cohere. In a recent conference call, Oracle’s chairman and CTO, Larry Ellison, stated that OCI would “win large AI training workloads,” as it is “faster and less expensive than the other infrastructure clouds.” He noted that Oracle is fueling this AI-driven expansion with what it claims is the “largest and fastest AI supercomputer in the world,” built with 65,000 Nvidia H200 GPUs.

Oracle continues to enhance its cloud-based AI toolkit, introducing numerous AI models and hundreds of embedded AI agents. The latest iteration of its cloud database, Oracle 23ai, allows organizations to harness their existing customer data for training large language models in generative AI applications.

Ultimately, Oracle intends to leverage its database market leadership to secure more customers for its cloud and AI services, particularly those looking to avoid larger platforms like AWS or Azure.

Evaluating Oracle’s Valuation

From fiscal 2024 to fiscal 2027, analysts project Oracle’s revenue and EPS to grow at CAGRs of 12% and 20%, respectively. This growth acceleration is expected to stem from its expanding cloud and AI businesses, along with earnings boosting buybacks.

Currently, at $155, Oracle’s stock trades at 30 times its projected GAAP earnings for fiscal 2026. While not a significant bargain, it appears reasonably valued in light of its growth potential.

With a forward dividend yield of 1%, income-oriented investors may not find it enticing; however, Oracle retains ample room to raise dividends, as it distributed only 46% of its free cash flow (FCF) on dividends over the past year. Analysts forecast an increase in annual FCF from $11.8 billion in fiscal 2024 to $15.4 billion in fiscal 2027, implying that Oracle is likely to return a significant portion of that cash to shareholders through dividends and buybacks.

Is Now the Right Time to Buy Oracle’s Stock?

Oracle’s stock may not see an immediate surge, but it remains a solid investment that reflects conservative growth in the cloud and AI sectors. Its scale, diversification, and commitment to shareholders contribute to its appeal as an investment opportunity today.

Should You Invest $1,000 in Oracle Stock Right Now?

Before purchasing stock in Oracle, weigh the following:

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Leo Sun has positions in Amazon and Meta Platforms. The Motley Fool has positions in and recommends Amazon, Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.