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Massive RPO Surge at Oracle: A Sign of Strong Forward Visibility?
OracleOracle(US:ORCL) ZACKSยท2025-09-11 15:16

Core Insights - Oracle achieved a significant milestone in Q1 of fiscal 2026, with Remaining Performance Obligations (RPO) increasing by 359% year over year to $455 billion, indicating a substantial backlog in the tech sector [1][9] - The growth is primarily driven by the rapid adoption of Oracle's cloud and AI services, securing four multibillion-dollar contracts from major companies such as OpenAI, Meta, NVIDIA, and AMD [2][9] - Oracle anticipates its Cloud Infrastructure (OCI) revenues to rise by 77% year over year to $18 billion in fiscal 2026, with ambitious revenue targets set for the next four years [3][9] RPO and Revenue Growth - The Cloud RPO surged nearly 500% after an 83% growth last year, with 33% of total RPO expected to convert into revenue within the next 12 months, enhancing confidence in Oracle's near-term performance [2] - Oracle's long-term revenue projections include $32 billion, $73 billion, $114 billion, and $144 billion over the next four years, much of which is already reflected in its backlog [3] Competitive Landscape - Microsoft remains a strong competitor with a commercial RPO of $368 billion, growing 35% year over year, and Azure revenues of $75 billion in fiscal 2025 [5] - Amazon's AWS holds $195 billion in outstanding deposits, with 25% growth and 17.5% revenue expansion year over year, maintaining its position as a mature cloud provider [6] - Despite Oracle's rapid RPO growth, Microsoft leads in revenue, while Oracle's aggressive multi-cloud and AI strategies are narrowing the gap [6] Stock Performance and Valuation - Oracle's shares have increased by 97% year to date, outperforming the Zacks Computer and Technology sector's return of 16.8% and the Zacks Computer - Software industry's rise of 15.4% [7] - The forward 12-month Price/Earnings ratio for Oracle is 34.55x, higher than the industry average of 32.26x, indicating a potentially overvalued position [10] - The Zacks Consensus Estimate for Oracle's fiscal 2026 revenues is $66.60 billion, reflecting a 16.02% year-over-year growth, with earnings projected at $6.73 per share, suggesting an 11.61% increase from fiscal 2025 [13]