Shares of veteran tech company Oracle(NYSE: ORCL) enjoyed a spectacular year. The stock was at a 52-week low of $99.26 last December before beginning an upward ascent in 2024. Just weeks ago, shares hit an all-time high of $178.61.
Oracle originally rose to prominence for its database software. Today, the company is focused on cloud computing, and that has supercharged its stock. Why? Because the cloud is the ideal home for artificial intelligence (AI), given AI's need for massive data and computing power.
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With the rise of AI combined with Oracle winning the business of ChatGPT creator OpenAI this year, the venerable tech titan's stock justifiably deserves investor interest. Does this mean now is the time to buy Oracle shares? Here's a look into the company to answer that question.
How Oracle's business is performing
Oracle's cloud-computing business is among the top 10 in the world and notched an impressive series of customer wins. Along with the OpenAI deal, Oracle's cloud infrastructure was chosen by the U.S. Army to modernize its personnel systems. The U.K. government also selected Oracle's cloud this year.
These customer gains enabled Oracle's cloud sales to increase 21% year over year to $5.6 billion in its 2025 fiscal first quarter, ended August 31. This result extended the company's fiscal Q4 performance when cloud revenue grew 20% year over year to $5.3 billion.
Overall Q1 revenue reached $13.3 billion, up from the prior-year's $12.5 billion. With this strong start to fiscal 2025, Oracle anticipates full-year revenue to rise by double digits and cloud-infrastructure sales growth to accelerate over fiscal 2024.
As a tailwind to Oracle's revenue growth, industry forecasts expect the cloud-computing market to expand from nearly $600 billion last year to over $2 trillion by 2032.
Oracle's investments in AI
Perhaps nothing tops the potential in Oracle's future more than AI. Cloud-computing data centers are essential components of AI infrastructure. So Oracle is pouring resources into expanding its cloud footprint.
According to co-founder and CTO Larry Ellison, the company possesses over 160 cloud-data centers around the globe and intends to build more. This month, the conglomerate announced plans to spend $6.5 billion constructing a data center in Malaysia. Ellison declared Oracle would eventually possess over 1,000 data centers.
To create sophisticated AI that can perform tasks such as identifying cancer, Oracle is constructing large, complex data centers. One of them will be so large, it will require three small modular nuclear reactors to power it.
Oracle is able to make these kinds of investments thanks to excellent operating cash flow. By the end of Q1, the company had generated $19.1 billion in cash flow from operating activities over the trailing 12 months, easily covering its capital expenditures (capex) of $7.9 billion over the same period. This is important since, as the company expands its data-center footprint, management anticipates fiscal 2025 capex to double over 2024.
That brings us to another Oracle strength: its free cash flow (FCF). The company generated first quarter FCF of $5.1 billion and $11.3 billion over the trailing 12 months. This, too, is important for investors to know since FCF is used to fund Oracle's dividend, currently yielding 0.9%. The company's FCF handily covered Q1's dividend payments of $1.1 billion, which means its dividend is secure.
Deciding if now is the time to buy Oracle stock
Given Oracle's traction in the cloud and AI markets, and its strategy to continue strengthening its position through data-center expansion, the company makes for a worthwhile long-term investment. The question is whether now is the time to invest, given shares recently reached a record high.
A look at Oracle's price-to-earnings (P/E) ratio, used to assess stock valuation, tells you how much investors are willing to pay for a dollar's worth of earnings. Oracle's elevated P/E multiple compared to other veteran tech-cloud giants, Microsoft and IBM, suggests its stock is expensive.
ORCL PE Ratio Chart
Taking a look at what Wall Street thinks, the consensus among Wall Street analysts is an overweight rating with a median share-price target of $190 for Oracle stock. So there's a belief in more upside despite Oracle's record-high share price.
Although the stock pulled back a bit from its high, its elevated P/E ratio indicates now isn't the best time to buy. Wait for Oracle's share price to dip further before considering an investment.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Robert Izquierdo has positions in Amazon, International Business Machines, and Microsoft. The Motley Fool has positions in and recommends Amazon, Microsoft, and Oracle. The Motley Fool recommends International Business Machines and 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.
