Oracle, once considered a slow-growth tech stock, has tripled in value over the past five years as it expanded its cloud-based services and grew revenue consistently. Despite being smaller than Microsoft with a market capitalization of $450 billion compared to Microsoft’s $3.2 trillion, Oracle’s long-term strategy is focused on expanding its higher-growth cloud software and infrastructure segments.
In fiscal 2020-2024, Oracle’s revenue grew at an 8% compound annual growth rate (CAGR), while earnings per share (EPS) increased by 5%. The company’s EPS was boosted by a one-time tax benefit in fiscal 2021 but declined after it lapped that gain. In fiscal 2023, its revenue was boosted by the acquisition of Cerner, which closed in June 2022.
Oracle’s core growth engines include Netsuite and Fusion enterprise resource planning services, as well as Oracle Cloud Infrastructure platform. The company is gradually integrating more of Cerner’s cloud services into this expanding ecosystem.
In the first quarter of fiscal 2025, Oracle generated 42% of its revenue from its cloud-based software as a service (SaaS) and infrastructure as a service (IaaS) segments. This combined segment’s revenue rose 22% year-over-year, representing a slight slowdown from its 23% growth in the fourth quarter of fiscal 2024.
For the full year, Oracle expects total revenue to grow by “double digits” with total cloud infrastructure revenue accelerating from its 50% growth in fiscal 2024. The company’s new Gen 2 Cloud Infrastructure platform is built to handle the market’s soaring demand for more robust AI services.
Analysts expect Oracle’s revenue to grow at a CAGR of 12% and EPS to increase by 22% from fiscal 2024 to fiscal 2027. If Oracle maintains its valuation, matches Wall Street expectations, and grows EPS at a CAGR of 20% from fiscal 2027 to fiscal 2031, its stock price could rally more than 160% to around $420 by the end of the decade.
However, even with this growth, Oracle’s market capitalization would still be less than Microsoft’s. Microsoft continues to expand its Azure cloud infrastructure platform, other cloud services are growing, and it is integrating OpenAI’s generative AI tools into its ecosystem. Analysts expect Microsoft’s revenue and EPS to grow at a CAGR of 14% and 15%, respectively, from fiscal 2024 to fiscal 2027.
Investors should focus on Oracle’s resilience and how it could continue to beat the market with its stable long-term growth rather than comparing it to other cloud giants.
Source: https://www.fool.com/investing/2024/09/16/will-oracle-be-worth-more-than-microsoft-by-2030/