Oracle Stock Surges on AI Cloud Surge and Bullish Outlook

Oracle (NYSE: ORCL) is grabbing Wall Street’s attention. Its stock surged nearly 11% intraday on Thursday, catapulting to an 11‑month high as it led the S&P 500 gainers investopedia.com. Investors reacted to stronger-than-expected Q4 results, lofty guidance, and the company’s massive bet on AI‑ready cloud infrastructure.

Q4 Financials Beat Estimates

For fiscal Q4 (ended May 31, 2025), Oracle delivered:

Revenue: $15.9 billion (+11% YoY), outperforming $15.6 billion consensus
Non‑GAAP EPS: $1.70 vs. $1.64 expected 
Cloud revenue (SaaS + IaaS): $6.7 billion (+27%) 
IaaS (infrastructure): $3.0 billion (+52%) 
RPO (Remaining Performance Obligations): $138 billion (+41%)

GAAP EPS landed at $1.19. Operating cash flow reached $6.2 billion for the quarter and $20.8 billion for the full year (+12%) .

Capital expenditures were colossal: $9.1 billion in Q4 (!), totaling $21.2 billion in fiscal 2025, driven by AI/data-center investments . This left the company with negative free cash flow of roughly $2.9 billion for the year.

Leadership: Counting on FY26 Growth

CEO Safra Catz called FY25 “a very good year,” yet foreshadowed a dramatic acceleration in FY26:

“FY25 was a very good year—but we believe FY26 will be even better as our revenue growth rates will be dramatically higher.”
“We expect our total cloud growth rate … will increase from 24% in FY25 to over 40% in FY26. Cloud Infrastructure growth rate is expected to increase from 50% in FY25 to over 70% in FY26. And RPO is likely to grow more than 100% in FY26.” panabee .com

Larry Ellison, chairman and CTO, echoed the same bullish theme:

“Oracle is well on its way to being not only the world’s largest cloud application company—but also one of the world’s largest cloud infrastructure companies.”
“Oracle will be the No. 1 cloud database company. Oracle will be the number one cloud applications company. And Oracle will be the number one builder and operator of cloud infrastructure data centers.” 

Ellison further highlighted explosive growth in multi‑cloud database use:

“MultiCloud database revenue from Amazon, Google and Azure grew 115% from Q3 to Q4 … We currently have 23 MultiCloud datacenters live with 47 more being built over the next 12 months.” 

Massive AI‐Driven Cloud Spending: The Trade-Off

Oracle’s Q4 capex spent (~60% of revenue) represents a bold wager barrons.com. FY26 capex is guided to climb to $25 billion, up ~18% from FY25. This level of investment is rarely seen outside hyperscalers.

Why so aggressive?

AI workloads demand massive GPU/data-center infrastructure. AI cloud growth fueled OCI (Oracle Cloud Infrastructure) demand, with IaaS climbing 62% YoY and database services surging.
Record backlog (RPO): Now at $138 billion, up 41% YoY, with multi‑cloud and cloud@customer RPO soaring 104–115%.
Stargate project: Oracle is part of the $500 billion U.S. AI infrastructure initiative alongside OpenAI and SoftBank.

Analysts weigh in: Many are bullish on long-term growth but cautious about margin impact:

Guggenheim’s John DiFucci: “Oracle stock might meander at times, but the trend here is up …” – Buy, $220 target
Evercore ISI’s Kirk Materne: Believes infrastructure spending could compress margins, but “Oracle can still deliver mid-high single-digit operating profit growth in fiscal 2026” – Outperform, $180 target
KeyBanc’s Jackson Ader: Warns that some capex may be “catch‑up” spending — but still raised target to $225, Overweight

Stock Performance & Analyst Sentiment

Oracle stock rallied ~45% from mid‑April through mid‑June, outpacing S&P both YTD and in the trailing year (+26% vs. +11%) investopedia.com. Following earnings, average Visible Alpha price target jumped roughly $20 to ~$194.

Analyst ratings:

Visible Alpha: 6 Buy vs. 7 Hold, no Sell – 63% Buy vs. 55% average S&P
Various firms now set targets between $180 and $225

Options market suggests ±7% move by week’s end (~$190–$164 range).

Risk Factors: Cash Flow, CapEx & Competition

Cash burn: Negative free cash flow in FY25—Oracle is intentionally sacrificing liquidity to build capacity finance.yahoo.com.
Margin pressure: Huge infrastructure spending could weigh on margins next 12–24 months .
Execution risk & competition: Scaling data centers quickly is hard, and Oracle faces resource juggernauts like AWS, Microsoft, and Google .
High valuation: Trades at ~31× projected FY26 earnings—slightly above Microsoft’s ~28× but justified if AI/cloud growth continues.

Why Investors Are Bullish on Oracle Stock

Massive RPO backlog: $138 billion in contracted future revenue provides strong visibility. At just 12–14% conversion rates, this equals ~$13.7 billion/year ainvest.com.
Cloud momentum: 52% IaaS growth, 27% total cloud YoY—indicative of accelerating AI and enterprise demand investing.com.
Multi-cloud & cloud@customer traction: 115% surge in multi-cloud revenue from hyperscalers, 104% growth in cloud@customer investor.oracle.com.
AI infrastructure & Stargate: Participation in monumental AI venture and building GPU-heavy capacity sets Oracle apart reuters.com.
Possible FCF rebound: Once capex stabilizes, free cash flow could return in a big way, justifying valuation investing.com.

What Could Trip Oracle Up?

CapEx overruns: Billions in sunk costs don’t turn into revenue instantly. Execution missteps or delays could hurt margins, as noted by Materne and others.
Cloud competition & commoditization: Oracle must differentiate its AI infrastructure by monetizing multi-cloud versatility and database integration.
Macroeconomic volatility: A broader tech pullback or economic contraction could depress sentiment on high-growth plays like Oracle stock.

The Takeaway

Oracle is transitioning from legacy software giant to AI-ready cloud powerhouse. Its Q4 beat was driven by 27% cloud growth and massive orders in AI infrastructure. Despite current negative free cash flow, the company is aggressively building capacity to support FY26 expectations: total cloud growth of ~40%, IaaS expansion >70%, and RPO doubling. barrons.com futurumgroup.com

CapEx cadence vs. free cash flow recovery
RPO conversion rates into recurring revenue stream
OCI utilization and hyperscaler partnerships
Margins as scale improves

For investors focused on oracle stock, it’s a macro play on the AI and cloud infrastructure boom. Bought at these levels, you’re betting on Oracle delivering its capacity buildout without execution snafus, flipping to cash flow positive within 18–24 months while riding fast-growing enterprise cloud demand.