Right now, there are only seven companies in the world that have scale Market value In excess of $1 trillion. These companies are ranked from largest to smallest Microsoft, apple, Nvidia, the alphabet, Amazon, Saudi Arabian OilAnd Meta platforms.
The obvious theme here is that most of these companies operate in the technology sector. Moreover, in technology, Microsoft, Alphabet, and Amazon all have something else in common: they are each a dominant force in cloud computing and artificial intelligence.
Beyond the big tech companies, I see another player quietly emerging at the intersection of cloud AI infrastructure. Let's analyze how inspiration (NYSE: Oracle) He makes remarkable strides in the field of artificial intelligence, analyzing the company's path to a trillion-dollar valuation.
Green Oracle Opportunity
According to Statista, Amazon is the largest cloud infrastructure provider with a 31% market share as of the end of the first quarter of this year. Microsoft and Alphabet come in the top three with a market share of 25% and 11%, respectively. With a market share of just 2%, Oracle trails the big tech groups by a significant margin.
However, Oracle's operating results over the past few quarters have been very impressive. For example, during the first nine months of Oracle's 2024 fiscal year, ending February 29, the company's cloud services revenue increased 26% year-over-year to $14.5 billion. In the last quarter specifically, cloud services increased 25% year over year to reach $5 billion. By contrast, Amazon's cloud business grew 17% year over year last quarter.
Although Amazon is a much larger cloud operation, Oracle is currently growing at a faster pace. I think this shows that cloud infrastructure, in general, is seeing exponential growth, and that companies are using platforms outside the top three providers. These secular tailwinds should bode well for Oracle in the long term.
Demand is at record levels
Aside from revenue, it's one of the most important metrics Oracle reports Remaining performance obligations (Robo). RPO is important because it provides investors with a preview of revenue that has been reserved but not yet recognized.
At the end of last quarter, Oracle's RPO grew 29% year over year and reached an all-time high of $80 billion. Furthermore, during the earnings call, management told investors that approximately 43% of these RPOs will be recognized as revenue over a 12-month period.
Given that Oracle's backlog is growing faster than its reported revenue, I think it's safe to say that demand for the company's cloud services is strong.
Can Oracle become a trillion dollar company?
The chart below shows consensus analyst estimates for revenue and earnings per share (EPS) for Oracle over the next two years. While these metrics are expected to accelerate, growth rates may appear somewhat weak compared to other SaaS providers.
One reason for this is that Oracle is seeing declining growth in its domestic business. Through the first nine months of fiscal 2024, Oracle's cloud-native operations generated $3.2 billion in revenue — down 11% year-over-year.
Although this may seem like a drawback or even a risk, it actually makes some sense. As on-premises services continue to move to the cloud, Oracle already has an opportunity to move this lagging component of its business into a new growth phase.
Given Oracle's position in the cloud market compared to larger players, such as Microsoft, Amazon, and Alphabet, the general consensus is that the company will take longer to scale, a view I agree with.
Currently, Oracle's market cap is around $320 billion and the company is trading at a price-to-sales (P/S) multiple of just 6.3. It's easy to see that Oracle trades at a significant discount to Microsoft specifically, and trades at a slightly lower price than Alphabet.
Given the rate at which Oracle is growing, coupled with its opportunity to turn its domestic business into a major growth engine, I think there's a good argument to be made that the company's valuation could rise significantly in the long term. – Perhaps making the higher estimates somewhat conservative.
In other words, as cloud database management continues to be an important pillar of digital transformation efforts and the overall enterprise-level AI narrative, Oracle's valuation multiples should eventually see some notable expansion and the company could one day reach trillion-dollar status.
But what investors should realize is that this transformation will take time. I think Oracle has shown some legitimate progress in a hot cloud market. I see Oracle as a huge buying opportunity among cloud infrastructure companies, and holding the stock for the long term could yield significant gains.
Should you invest $1,000 in Oracle now?
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Susan Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Adam Spatacco He holds positions at Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Fool recommends the following options: long $395 January 2026 calls on Microsoft and short $405 January 2026 calls on Microsoft. The Motley Fool has Disclosure policy.
Prediction: These cloud AI stocks will join Microsoft, Alphabet, and Amazon in the trillion-dollar club Originally published by The Motley Fool
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