It wasn’t long ago when Oracle (NYSE: ORCL) was approaching a $1 trillion market cap, thanks in large part to optimism about its cloud computing business. However, the stock is down by more than 50% from the all-time high it set almost a year ago, and it currently has a market cap below $500 billion.
This dramatic drop has created a buying opportunity, and if Oracle can continue to ride the tailwinds of the AI megatrend for multiple years, it has a real shot at recovering past that peak and reaching a $1 trillion valuation for the first time.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
Cloud revenue continues to climb
Oracle’s cloud segment is the most important part of the business to consider when assessing how far the stock can climb. That segment continues to do well. Oracle reported cloud revenue growth of 47% year over year in its fiscal 2026 fourth quarter. Total revenue for the company was up by 21%.
The major drag on the stock relates to Oracle’s remaining performance obligations. It has $638 billion in its backlog. That’s a good number on the surface since Oracle earned $19.2 billion in its fiscal 2026 fourth quarter. The issue is that its contract with OpenAI accounts for more than $300 billion of that $638 billion total.
There is a lot of uncertainty about that contract. First, in December, Bloomberg reported that Oracle was going to delay delivery of the OpenAI-related data center project by a year — an assertion that Oracle promptly denied. According to Oracle, those data centers will be delivered on time in 2027.
Investors’ bigger concern regards OpenAI’s ability to pay $60 billion per year for five years to Oracle when it posted a $38.5 billion net loss in 2025. Its $40 billion in annual recurring revenue wouldn’t be enough to cover that commitment, even if it operated with 100% net profit margins, and the Oracle contract is far from OpenAI’s only expense.
These concerns are valid when it comes to the pipeline, but Oracle is delivering solid results right now, and it still has a lot of other customers with more reliable finances in its remaining performance obligations.
The valuation has dropped considerably
Anytime a stock goes through a deep correction, it’s a good time to reassess its valuation. Although Oracle previously commanded a P/E ratio in the 50s, it only trades at a 26 P/E ratio right now. Furthermore, its price/earnings-to-growth (PEG) ratio is just 0.86. Any stock with a positive PEG ratio below 1 is generally viewed as being undervalued.
