Evaluating Investment Opportunities: Oracle vs. Amazon in Cloud Services
Oracle (NYSE: ORCL) and Amazon (NASDAQ: AMZN) offer two distinct approaches to tapping into the expanding cloud and artificial intelligence (AI) markets.
Oracle’s Steady Transformation into Cloud Services
Oracle, a major player in database software, has shifted many of its traditional applications to the cloud over the last decade. Additionally, it has developed its public cloud infrastructure for enterprises, offering remote storage and computing power. In contrast, Amazon stands out as the largest e-commerce business globally and operates Amazon Web Services (AWS), which is the leading cloud infrastructure platform.
Although Oracle is often viewed as having slower growth compared to Amazon, its stock has more than doubled in value over the past three years, while Amazon’s stock increased only about 40%. Let’s explore why Oracle has outperformed Amazon and whether it remains the superior investment choice.
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Consistent Growth for Oracle
In fiscal 2024, Oracle derived 32% of its revenue from cloud services (excluding its 2022 acquisition of Cerner), with this segment—housing database services, enterprise resource planning (ERP) services, and Oracle Cloud Infrastructure (OCI)—growing revenue by 26%. This growth reflects only a slight reduction from the 29% growth seen in fiscal 2023 (also excluding Cerner).
Despite the boost from cloud services, Oracle still relies on legacy on-premise and cloud licensing businesses, which experience slower growth. Altogether, the company’s total revenue rose 6% over the year.
Looking ahead from fiscal 2024 to fiscal 2027, analysts project Oracle’s revenue and earnings per share (EPS) to grow at compound annual growth rates (CAGR) of 12% and 20%, respectively. This growth is expected largely from OCI’s expansion, which is introducing tools for generative AI applications, along with strategic acquisitions in the cloud and AI sectors.
While this outlook appears promising, Oracle faces intense competition. OCI remains a small contender compared to AWS and Microsoft Azure, both of which are expanding their own integrated database services to challenge established firms like Oracle.
Amazon’s Recovery in Core Businesses
Although e-commerce still accounts for the majority of Amazon’s revenue, most of its profits stem from the higher-margin business of AWS. In 2024, AWS contributed 17% of Amazon’s net sales but generated a significant 58% of its operating profit.
AWS saw a 19% revenue increase for the year, fueled by rising demand in the AI sector, prompting more businesses to enhance their cloud infrastructures. The introduction of custom application programming interfaces (APIs) like Bedrock has also encouraged the use of tailored chatbots and generative AI tools.
Amazon’s business model allows it to support its low-margin e-commerce growth with the higher-margin revenue from AWS. This flexibility creates a strong competitive edge in both e-commerce and cloud services. Still, Amazon must navigate challenges from rivals like Microsoft in the cloud arena and cope with heated competition in e-commerce from Chinese marketplaces like PDD‘s Temu.
From 2024 to 2027, analysts predict Amazon’s revenue and EPS growth at a CAGR of 10% and 20% respectively, aided by an improving economic landscape and growing AI market.
Which Stock to Choose?
Oracle’s strong performance over the past three years is attributed to its solid cloud growth during periods of economic uncertainty, while Amazon’s e-commerce sector was less resilient during that time. Now, as interest rates decline and the economic environment stabilizes, Amazon is positioned to regain investor interest as its businesses continue to expand.
Currently, both stocks are not inexpensive. Oracle trades at around 33 times forward earnings compared to Amazon’s higher multiple of 36. Despite Oracle trading at a lower forward valuation, it is experiencing a slightly faster growth rate than Amazon, making Oracle a more balanced choice for investors exploring the expanding cloud and AI markets.
Should You Invest $1,000 in Oracle Now?
If you’re considering a stock purchase in Oracle, think carefully:
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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. The Motley Fool has positions in and recommends Amazon, Microsoft, 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.
