Oracle Stock Surges 50% But AI Training Could Be A Reason To Sell In 2026

Oracle Stock Surges 50% But AI Training Could Be A Reason To Sell In 2026

Oracle Stock Surges 50% But AI Training Could Be A Reason To Sell In 2026

REDWOOD CITY, CA - MARCH 20: Pedestrians pass the Oracle Corp. headquarters March 20, 2006 in ... [+] Redwood City, California. Oracle Corp.?s quarterly profit increased 42 percent, earning $765 million, or 14 cents per share compared to $540 million, or 10 cents per share, the same time last year. (Photo by Justin Sullivan/Getty Images)

Oracle shares have risen 50% in 2024 after its boffo 2025 fiscal Q1 earnings report. That increase is far more compelling than the rise in shares of Amazon (+17%), Apple (+18%), Google (+7%), and Microsoft (+9%).

The rise in Oracle stock can be explained by the company’s expectations-beating performance — most notably in the latest quarter. But analysts expect that growth to continue at least through 2026.

Ironically, Oracle is benefiting now from missing out on creating its own cloud services business when AWS and its peers latched on to that growth opportunity more than a decade ago, according to the Wall Street Journal.

AWS, Microsoft, and Google are choosing Oracle — due to its neutrality — to run the data centers they use for training the large language models that drive AI chatbots, notes the Journal.

Sadly for Oracle, once LLMs are trained, there is no significant need to retrain them. Unless Oracle can repurpose its data centers for responding to user queries, known as inferencing, Oracle’s growth may slow down.

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After that, unfavorable growth comparisons could send the company’s stock into neutral. Larry Ellison, Oracle’s co-founder, chairman and chief technology officer, does not agree — he sees no end in sight, according to a September 9 investor call.

Oracle’s Latest Earnings Beat Expectations

Oracle beat expectations and raised guidance in its August quarter. Oracle also said it will bring database services to cloud infrastructure market leader Amazon Web Services, noted CNBC.

While Oracle shares traded at about $140 before the earnings release — up 34% for the year compared to the S&P 500’s 15% gain, the company’s stock rose nearly 12% to a record high of about $157 on September 10.

Here are the key numbers:

Why Oracle Is Growing

Oracle’s fastest growth comes within the company’s cloud services and license support business, which generated $10.52 billion in revenue — a 10% increase from the previous year and $50 million more than the StreetAccount consensus, noted CNBC.

The most eye-popping growth came from Oracle’s cloud infrastructure, which rose 45% to $2.2 billion — an acceleration from the previous quarter’s 42% increase, CNBC reported.

Cloud infrastructure sales jumped 49%, 52% and 66% in the prior quarters, thanks to Oracle’s “winning cloud-computing contracts from AI-focused startups,” noted Investor’s Business Daily.

Oracle is seeing “huge demand” from customers who want to use multiple cloud providers, Ellison said in a news release.

“To meet this demand and give customers the choice and flexibility they want, Amazon and Oracle are seamlessly connecting AWS services with the very latest Oracle Database technology, including the Oracle Autonomous Database,” he added.

Large cloud services providers — such as AWS, Microsoft, and Google; as well as xAI and Nvidia — all derive comfort from Oracle’s decision not to develop its own large AI models that compete with potential clients, the Journal reported.

Meanwhile Oracle says it is currently designing a data center that will use more than a gigawatt of power— relying on three modular nuclear reactors. Over time, Oracle might operate 2,000 data centers, up from 162 today, said Ellison on the earnings call.

In a separate statement on Monday, Oracle said it would partner with cloud infrastructure market leader AWS to enable its database services on dedicated hardware.

Can Oracle Sustain Expectations-Beating Growth?

Analysts appear bullish on Oracle stock. One reason is the 53% growth in Oracle's contracted work — called remaining performance obligations — to $99 billion.

“The RPO growth shows the strong momentum for Oracle Cloud and the Oracle AI story,” Barclays analyst Raimo Lenschow said in a client note featured by IBD.

“This large bookings number should give investors confidence that Oracle can accelerate revenue this year and next and makes the (fiscal year) 2026 targets even more realistic, in our view,” Lenschow added.

Oracle’s AWS partnership is a sign of customers’ loyalty to the company. That could accelerate “more on-premise workloads transition to the cloud,” Evercore ISI analyst Kirk Materne wrote.

Between the current fiscal years 2025 and 2027, Oracle’s AI revenue could increase from 15% of Oracle’s total cloud revenue “to more than half by 2027,” Dan Morgan, a portfolio manager at Synovus Trust, told IBD.

LLM training is one and done, noted the Journal — but Oracle does not buy it. “This business is just growing larger and larger and larger,” Ellison told investors on September 9. “There’s no slowdown or shift coming.”

If analysts are correct, Oracle stock has at least a few more years of growth if the company can keep beating expectations and raising guidance.

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Source: https://www.forbes.com/sites/petercohan/2024/09/10/oracle-stock-up-50---but-ai-training-is-why-to-sell-in-2026/

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