Decades of information technology (IT) and cloud systems expertise could drive this artificial intelligence (AI) specialist to new heights.
One of the biggest secular tailwinds of the past several years has been that of artificial intelligence (AI). Lest there be any question, a quick scan of the top-ranking companies by market cap helps to dispel any remaining doubts. In fact, nearly all the companies in the $1 trillion club have one thing in common — they are each developing, deploying, or manufacturing products on the cutting edge of AI.
Apple has a long history of integrating sophisticated algorithms to give its state-of-the-art products an edge. Nvidia graphics processing units (GPUs) provide the technology that makes generative AI possible. Microsoft joined forces with OpenAI to spur the evolution of ChatGPT. Alphabet, Amazon, and Meta Platforms have all developed top-shelf generative AI models that are bringing the technology to the masses. Taiwan Semiconductor Manufacturing is the foundry that produces the vast majority of the most advanced chips used for AI.
With a market cap of just $483 billion, it might seem premature to nominate Oracle (ORCL 0.74%) for membership in this prestigious fraternity. However, the company’s recent business performance and management’s forecast suggest that the accelerating demand for generative AI could drive additional growth for years to come.
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A trusted AI partner
Oracle has previously reported that 98% of Global Fortune 500 companies use some combination of its database, cloud, and enterprise software. This puts the company in a prime position to help new and potential customers interested in adopting AI.
This has helped fuel robust overall growth. During Oracle’s fiscal 2025 first quarter (ended Aug 31), revenue grew 7% year over year to $13.3 billion, while its operating income growth accelerated to 21% — but that’s just the beginning.
Oracle continues to experience a surge of new business, and CEO Safra Catz pointed out a growing trend of customers opting for “larger and longer contracts as they see firsthand how Oracle Cloud services are benefiting their businesses.” This trend is fueling the company’s remaining performance obligation (RPO) — or contracts not yet included in revenue — which surged 53% year over year to $99 billion. When RPO is growing faster than revenue, it points to a robust pipeline of revenue growth, which bodes well for the future.
As a result, the company expects its fiscal 2025 revenue to accelerate in each successive quarter, ultimately growing by double-digits for the year. In the second quarter, Oracle expects its revenue growth rate to climb to 8% at the midpoint of its guidance, fueled by cloud revenue growth of 24%. This will drive adjusted earnings per share (EPS) growth of 8%.
The path to $1 trillion
Oracle has a distinguished track record of helping customers adopt appropriate cloud solutions, which makes it easier when they make the decision to join the AI revolution. That said, this paradigm shift will take years, if not decades, to complete.
According to Wall Street, Oracle is expected to generate revenue of $58 billion in its fiscal 2025 (which began Jun. 1), giving it a forward price-to-sales (P/S) ratio of 8. Assuming its P/S remains constant, Oracle would need to grow its revenue to approximately $120 billion annually to support a $1 trillion market cap. Analysts are forecasting revenue growth of about 20% for the full fiscal year and 12% thereafter. If the company achieves these benchmarks, Oracle could reach the $1 trillion market cap by 2032.
However, management just increased its outlook and is guiding for revenue of at least $104 billion by fiscal 2029, which works out to a compound annual growth rate (CAGR) of more than 16%. If Oracle hits its internal targets, it will likely reach a market cap of $1 trillion by 2030 — if not sooner.
Estimates regarding the impact of generative AI continue to ratchet higher. The market could be worth between $2.6 trillion and $4.4 trillion annually, according to global management consulting firm McKinsey & Company.
If the company can continue to serve customers looking to adopt AI, this will reflect in its growth rate and Oracle will join the ranks of trillionaires sooner than investors might imagine.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. 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. Danny Vena has positions in Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Oracle, and Taiwan Semiconductor Manufacturing. 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.
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