Oracle’s Path to Becoming the Next Trillion-Dollar Company
The U.S. economy has a long history of producing highly valuable companies. In 1901, United States Steel became the first company to reach a $1 billion valuation. Fast forward to 2018, when Apple emerged as the first company to achieve a $1 trillion market cap. Currently, Apple leads with a market capitalization of $3.3 trillion. Other major American companies have joined the trillion-dollar club since 2018, including Microsoft, Nvidia, Amazon, Alphabet, Meta Platforms, and Berkshire Hathaway. Though Tesla and Broadcom made the list, they have recently seen sharp declines in their stock prices.
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One company poised to potentially reach the $1 trillion milestone in the coming years is Oracle (NYSE: ORCL). Oracle provides top-notch data center infrastructure essential for artificial intelligence (AI) development. Current management indications suggest this segment may grow significantly, potentially expanding tenfold over time.
As of now, Oracle’s valuation stands at $403 billion. Should the stock successfully breach the $1 trillion threshold, investors purchasing it today could see gains of 148%.
Image source: Getty Images.
Explosive Demand for AI Data Centers
Developing an AI model involves two critical phases: the training phase, where data is fed to the model, and the inference phase, during which the model generates user responses (often seen in chatbots). Both phases require substantial computing power, primarily sourced from companies like Oracle.
Renowned for its advanced AI data centers, Oracle utilizes state-of-the-art graphics processing units (GPUs) from top manufacturers including Nvidia and Advanced Micro Devices. The company is currently building a massive cluster featuring 64,000 Nvidia Blackwell GB200 GPUs. This cluster will not only be the most powerful chip currently available but one of the largest clusters operated by any data center provider.
Access to a greater number of chips allows developers to process larger data sets more rapidly, enhancing the intelligence of AI models. Beyond scale, Oracle benefits from its proprietary random direct memory access (RDMA) networking technology, which accelerates data transfer compared to conventional Ethernet networks. For developers paying for computing capacity by the minute, this results in notable cost savings.
During its fiscal 2025 third quarter (ended February 28), Oracle opened its 101st data center cloud region. However, demand continues to exceed supply significantly. Recently, chairman Larry Ellison indicated that GPU usage for AI training purposes has skyrocketed by 244% in the last year. Moreover, the company is experiencing “enormous” demand for inference workloads.
Nvidia CEO Jensen Huang predicts that next-generation AI reasoning models will require up to 100 times more computing power than previous versions. Consequently, the need for data center capacity for these inference workloads is just beginning to grow, motivating Oracle’s ambition to expand its footprint to 1,000 to 2,000 cloud regions in the future.
This expansion could result in Oracle operating more than ten times the number of data centers it currently has.
Surging Revenue from Oracle Cloud Infrastructure
In the fiscal 2025 third quarter, Oracle reported total revenue of $14.1 billion. Of that, the Oracle Cloud Infrastructure (OCI) segment—accounting for its AI data centers—generated $2.7 billion.
Even though Oracle’s total revenue saw a modest 6% increase year over year, OCI revenue experienced significant growth, soaring by 49%, making it the fastest-growing sector within the company. The projected growth could accelerate further as more data centers come online to meet rising demand.
According to Oracle CEO Safra Catz, OCI revenue is expected to increase by over 50% for the complete fiscal year 2025 (ending May 31), with even more rapid growth anticipated for fiscal 2026.
Oracle’s remaining performance obligations (RPOs) soared by 63% to a record $130 billion during the third quarter across all business segments. RPOs reflect the order backlog expected to convert into future revenue, and demand for capacity in AI training and inference workloads significantly contributed to this rise.
Navigating Oracle’s Path to the $1 Trillion Club
Over the last four quarters, Oracle reported earnings of $4.26 per share (EPS), resulting in a price-to-earnings (P/E) ratio of 33.8. This valuation aligns closely with other AI cloud companies like Microsoft and Amazon, placing Oracle’s stock in a neutral position—not overly cheap or expensive.
PE Ratio data by YCharts
According to Wall Street’s consensus estimate from Yahoo!, Oracle may achieve an EPS of $6.78 during fiscal 2026, which begins in June 2025. This projection places the stock’s forward P/E ratio at just 21.1, suggesting a required 59% increase in share price to maintain the current P/E ratio of 33.8.
Such growth could elevate Oracle’s valuation to $640 billion. To reach the $1 trillion mark, the company would need to expand its EPS by just 9.3% annually over the next five years—a goal considered realistic for two key reasons: first, projected EPS growth of 13% for fiscal 2026; second, management anticipates accelerating revenue driven by the OCI division.
Oracle’s emphasis on automation in its data centers promises reduced labor and operational costs. Consequently, the company expects profit margins to improve as the OCI segment scales, ultimately boosting its EPS further.
Oracle’s Growth Potential: Key Considerations for Investors
Oracle plans to expand its data center footprint more than tenfold, a move expected to significantly boost its long-term earnings prospects. This ambitious expansion indicates a strong trajectory for the company, potentially positioning it to join the elite $1 trillion market capitalization club in the coming years. Investors might find Oracle’s stock a valuable addition to a diversified portfolio.
Is Now the Right Time to Invest $1,000 in Oracle?
Before committing to buy Oracle stock, consider the following:
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Randi Zuckerberg, former director of market development at Facebook and sibling to Meta Platforms CEO Mark Zuckerberg, serves on The Motley Fool’s board. John Mackey, former CEO of Whole Foods Market, is also on the board, along with Suzanne Frey, an executive at Alphabet. Anthony Di Pizio holds no position in any of the mentioned stocks. The Motley Fool has interests in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Berkshire Hathaway, Meta Platforms, Microsoft, Nvidia, Oracle, and Tesla. They also recommend Broadcom and have options positions on Microsoft. The Motley Fool maintains a disclosure policy.
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