Is Oracle Stock a Buy Now?

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Jake Lerch, The Motley Fool

Sun, Mar 30, 2025, 7:15 AM 4 min read

At archetypal blush, immoderate investors mightiness place this throwback tech stock, assuming that it wouldn't person performed good successful the property of artificial quality (AI). That would beryllium a mistake: Over the past 3 years, Oracle banal has been an fantabulous investment. Not lone has it outperformed the S&P 500 and Nasdaq Composite handily, it has besides outpaced immoderate of the astir salient stocks wrong those indexes.

Take Microsoft, for example. As of this writing, its shares person generated a full instrumentality of 34% implicit the past 3 years -- much oregon little matching the total returns of both the S&P 500 and Nasdaq Composite. However, Oracle has generated a full instrumentality of 97%.

Clearly, Oracle has been an outperformer. But why?

In short, the reply comes down to one thing: AI infrastructure demand. As the request for AI services has taken off, truthful has the request for the information centers used to tally the latest AI applications. Oracle, arsenic 1 of the world's starring providers of information halfway servers, has benefited arsenic the request for high-powered, cutting-edge servers has increased. It besides operates its ain large web of unreality information centers.

In its fiscal 2025 3rd quarter, which ended connected Feb. 28, Oracle's gross accrued 6% twelvemonth implicit twelvemonth to $14.1 billion. However, unreality services gross jumped by 23% to $6.2 billion, astir 44% of its full revenue.

In addition, the institution noted it holds a important income backlog, arsenic evidenced by signed income contracts with Meta Platforms, Nvidia, AMD, OpenAI, and xAI, which should thrust further gross enlargement successful 2025.

Moreover, Stargate -- a backstage associated task betwixt OpenAI, SoftBank, and Oracle that they announced earlier this twelvemonth -- could enactment arsenic an further catalyst arsenic it is expected to further boost request for AI grooming and inference. The 3 tech companies program to put up to $500 cardinal successful gathering arsenic galore arsenic 20 ample AI information centers successful the U.S. by 2029.

While skyrocketing AI request may look to make Oracle a screaming bargain right now, determination are risks to investing successful it. First off, the institution is spending heavy to grow its information halfway network. As a result, its escaped currency travel has dipped implicit the past twelvemonth adjacent arsenic its gross and nett income person grown.

Second, immoderate slowdown oregon pullback successful AI spending by large players could effect successful a deceleration successful Oracle's growth. Given that it's lone increasing gross astatine a 6% yearly clip, it doesn't person overmuch wiggle room.