Meet the AI Stock Set to Join the $1 Trillion Club

Decades of experience in cloud systems and information technology (IT) could lift this artificial intelligence (AI) company to remarkable heights. The influence of AI on the technology sector has been undeniable over the past few years, and its full impact is still unfolding. Notably, a glance at the world’s most valuable companies reveals that nine out of the top ten, all part of the prestigious $1 trillion club, share significant connections to AI.

Prominent players in the semiconductor and IT industries have secured their positions on this list. For instance, Nvidia supplies nearly all the graphics processing units (GPUs) essential for generative AI in data centers, while Taiwan Semiconductor Manufacturing produces around 90% of the most advanced AI chips globally. Meanwhile, Broadcom plays a crucial role in tech infrastructure, processing a vast majority of internet traffic through its devices.

Currently, with a market capitalization of $457 billion, Oracle seems to be a bit behind in the race for $1 trillion status. However, its recent business growth, coupled with an optimistic long-term forecast, suggests that the rising demand for AI could help Oracle expand significantly in the coming years.

A Trusted Partner in Technology

Oracle boasts a remarkable statistic: approximately 98% of Global Fortune 500 companies are clients, utilizing various cloud, database, and enterprise software services it offers. This extensive customer base provides Oracle a vast market to promote its AI and cloud solutions.

The company saw its revenue increase by 9% year-over-year to $14.1 billion in the second quarter of fiscal 2025, with operating income climbing by 17%. Despite concerns regarding a drop in the operating income margin from 21% in the prior quarter, much of this decline was attributed to challenges posed by foreign currency fluctuations, not internal operational issues.

As many businesses seek reliable partners to assist with their AI integration, Oracle’s influence has grown. CEO Safra Catz emphasized the “increasing customer demand and longer contract lengths” as clients realize the benefits of Oracle Cloud services. Furthermore, cloud revenue soared 52% year-over-year, significantly outpacing the growth of larger competitors.

This trend has also impacted Oracle’s remaining performance obligation (RPO), which surged 50% year-over-year under constant currency to $97.3 billion. The growth in RPO, which includes future contractual obligations not yet recognized as revenue, provides a robust outlook for Oracle’s future growth.

For the upcoming third quarter, Oracle expects to see revenue acceleration to approximately 10% growth at midpoint guidance, aided by cloud revenue growth of 26%. This is anticipated to result in adjusted earnings per share (EPS) growth of around 8%.

The Journey Towards $1 Trillion

Oracle has a solid track record of assisting clients in selecting effective IT, cloud, and AI solutions. This positions the company well to engage with the generative AI movement. However, it’s essential to recognize that achieving this transition may take many years.

According to analysts, Oracle is projected to earn about $57.7 billion in revenue during its fiscal 2025. Assuming a consistent price-to-sales (P/S) ratio of around 8, the company would need to boost its revenue to approximately $126 billion annually to justify a $1 trillion market cap. Current forecasts indicate revenue growth of about 9% this fiscal year and 13% in subsequent years. If these goals are met, Oracle could reach a $1 trillion valuation by 2032.

However, with management recently raising its long-term revenue outlook to at least $104 billion by fiscal 2029 (indicating a compound annual growth rate of over 16%), if Oracle meets these internal projections, it may achieve a $1 trillion market cap by 2031 or even sooner.

The generative AI market's valuation keeps increasing, with estimates suggesting it could hit up to $15.7 trillion annually by 2030, according to Big Four accounting firm PwC. If Oracle captures even a small part of this massive market and continues to deliver powerful AI solutions, the company’s growth trajectory could remain strong throughout the decade, speeding its entry into the exclusive $1 trillion club.

Note: This article discusses certain companies and their estimated potential. Please conduct your research or consult with a financial advisor.

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