Oracle’s AI Investments Propel It Toward Record Growth
It was a big week for Oracle. After experiencing a significant sell-off in tech during August, Oracle shares managed to end the month on a high note. Last week, the story took a dramatic turn, with the stock surging 14% and reaching a record high on Friday.
This rally was spurred by the company’s robust revenue forecast for fiscal 2026 and beyond. Oracle has now become the second-best performing technology stock this year, trailing only Nvidia, with a 54% increase in stock value. “Oracle has been able to create multiple AI capabilities that simply enhance the standard SaaS offerings and make the solution more powerful,” Barclays analyst Raimo Lenschow noted.
The firm projects continued upward momentum for Oracle’s shares. Oracle’s recent performance underscores the potential opportunities in the software sector, particularly within the realm of artificial intelligence. Investors have been eagerly awaiting evidence that investments in generative AI would translate into tangible benefits for software companies.
Despite Oracle’s significant gains, the S&P 500 Software & Services subsector has only risen 12% year to date, lagging behind the tech sector’s more substantial 26% growth in 2024. Over the past three years, software stocks have struggled due to softened revenue growth and macroeconomic uncertainties, leading small- to mid-size companies to scale back on software spending. However, the rise of AI is expected to drive a new growth cycle.
Oracle’s growth fuels investor optimism
Historically, the software industry has maintained a median growth rate of 40%, yet growth from 2017 to 2024 has fallen below this historical benchmark. Analysts indicate that legacy firms like Oracle, Microsoft, and SAP, which dominate market share, are showing early signs of capitalizing on the AI wave.
These companies’ deep market roots and substantial resources allow them to invest in and scale new products, further solidifying their market dominance. “For the first time in a dozen years, you’re looking at organic growth going back to the double digits,” explained Pat Walravens, head of technology research at Citizens JMP, highlighting Oracle’s improved growth story driven by its cloud infrastructure services. This optimism was reflected in Oracle’s recent investor day, where it raised its 2026 revenue target to $66 billion and projected a 16% annual growth rate to $104 billion by 2029.
Additionally, Oracle anticipates a 20% yearly increase in non-GAAP earnings per share by 2029. According to Bernstein analyst Mark Moerdler, who considers Oracle his top investment idea, the stock is “growing significantly faster than their peers in that market space.” Oracle has strategically positioned itself as a leader in AI by investing early in GPU infrastructure, which supports AI-driven cloud computing. This foresight has led to significant contracts, including billion-dollar deals with companies like OpenAI.
Oracle’s proactive approach yielded impressive results, with contract bookings reaching $99 billion in the quarter ending August 31, a 53% year-over-year increase. Oracle Cloud Infrastructure (OCI) remains central to this growth, offering a suite of services for AI-driven workloads. The company expects capital expenditures to double by fiscal 2025 to support growing AI-driven cloud capacity.
As Oracle continues to leverage AI to enhance its offerings and drive growth, its strategic investments and forward-thinking approach have positioned it as a key player in the evolving tech landscape.
