Will Oracle's Expanding Cloud Partnerships Fuel Long-Term Upside?

Core Insights - Oracle's expanding cloud partnerships are expected to drive long-term growth, particularly in the AI infrastructure market, with significant contracts already signed and more anticipated [1][2] - The company has committed $35 billion in capital expenditures for fiscal 2026 to build 37 new multi-cloud data centers, aligning with its AI-driven backlog [3] - Oracle's revenue growth projections are strong, with a Zacks Consensus Estimate of $66.75 billion for fiscal 2026, indicating a year-over-year growth of 16.29% [14] Cloud Partnerships - Oracle has secured landmark multibillion-dollar contracts with major players like OpenAI, Meta, NVIDIA, and AMD, contributing to a significant increase in Remaining Performance Obligations (RPO) [1][9] - OpenAI's contract alone is valued at $300 billion over five years, marking it as one of the largest cloud contracts ever [2] - 33% of Oracle's total RPO is expected to convert into revenues within the next 12 months, providing a near-term revenue boost [2][9] Infrastructure Investment - To support the growing demand for cloud services, Oracle is investing heavily in infrastructure, with a focus on expanding its data center capacity [3] - The planned investment of $35 billion in fiscal 2026 is aimed at ensuring the company can fulfill existing contracts and capitalize on new opportunities as AI adoption increases [3] Financial Performance - Oracle's stock has surged 81% year-to-date, significantly outperforming the broader technology sector [7] - The company is projected to achieve nearly 19% revenue growth in fiscal 2027, driven by its AI partnerships [4] Valuation Metrics - Oracle's current forward Price/Earnings ratio stands at 42.79x, which is above the industry average of 33.24x, indicating a potentially overvalued position [11] - The earnings consensus for fiscal 2026 is $6.75 per share, reflecting an 11.94% growth compared to fiscal 2025 [14]