Oracle Stock: Resilient, Undervalued, and Ready to Rebound

Key Points

• Oracle's cloud shift positioned it among today's tech leaders, ensuring its longevity. 
• The Q1 stock price pullback overcorrected and has the market set up to rebound.
• Analysts forecast a 35% upside relative to mid-April price points. 

Analysts at Evercore ISI highlighted names like Microsoft NASDAQ: MSFT and Salesforce NYSE: CRM as most resilient in the face of potential spending slowdowns, listing Oracle NYSE: ORCL among those most exposed.

However, the company’s rapidly changing business model and position in AI make it more resilient than first glance will suggest. 

The cloud shift was a game-changer that ensured the company's longevity.

Leaning into data center growth and next-gen AI capability positioned it among today’s tech leaders.

Oracle, once simply a database company, is now critical to global databases, AI infrastructure, and AI-assisted services. 

Oracle Is Entrenched in the Business Community

To put Oracle’s standing in the business community into perspective, about 98% of the Fortune 500 use its services to one degree or another. Analysts have difficulty agreeing on the exact figure but generally accept that nearly 100% of Fortune 500 and a slightly lower amount of the Fortune 100 are using it.

Services that stand out include enterprise resource management, human capital management, and supply chain management, three segments easily enhanced by AI that businesses are turning to in more significant numbers. The forecast for all in early Q2 2025 is for a low-double-digit CAGR through the decade's end. 

Highlights from F2025 include new and expanded deals with the three largest hyperscalers: Amazon NASDAQ: AMZN, Alphabet NASDAQ: GOOGL, and Microsoft NASDAQ: MSFT. Those deals have Oracle’s technologies embedded across the data center universe, making it the most accessible database and data-centric business to businesses and consumers globally.

The top three hyperscalers account for roughly 63% of the global market share, not including Oracle’s 3%. Oracle has only a 3% share but ranks within the top five Western cloud providers by revenue and capacity. The forecast for 2025 is for the company’s capacity to double, driven by advanced, AI-focused facilities, a move that will drive market share gains. 

Oracle’s Mixed Results Overshadow Improving Momentum 

Oracle’s results were good in the back half of C2024 but weaker than forecasted by MarketBeat’s reported consensus, leading the market into its 2025 stock price correction. However, the critical details are strengths in the critical cloud segments, including IaaS (infrastructure) and SaaS (software services), which drove current results, and the deal backlog is growing.

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As indicated by the RPO or remaining performance obligation, the company's backlog grew by 49% in FQ2 and accelerated to 62% in FQ3, topping $130, equal to roughly nine quarters of revenue at the FQ3 pace. The backlog increase is driven by demand for computing space and is expected to have grown in Q4. 

The analysts’ response to the news was to reset their forecasts. The result is a diminished outlook for FQ4, reported in June 2025, with 100% of analysts lowering their targets and an increased outlook for long-term revenue and earnings growth.

Even so, the company is expected to accelerate top-line growth to 9% and sustain a healthy margin. The earnings outlook presents a potential catalyst because it assumes flat to slightly higher earnings YOY despite the accelerated growth and will likely be beaten by a wide margin. 

Oracle’s Stock Price Overcorrected, Rebound in the Works

Oracle’s analysts also reset their stock price targets, negatively impacting the market. The takeaway for investors is that the market corrected because of the reset but overcorrected, moving well below the consensus to the low-end range.

The low-end range provides a floor for market sentiment, and the consensus estimate is a carrot worth 35% when reached. That is likely because of the trend in revisions. Most align with an at-consensus or higher outlook, suggesting 35% could be the minimum movement. 

The price action in mid-April aligns with an outlook for a rebound, showing an overextended market and support at critical levels. The stock is also deeply undervalued at the current levels, trading at only 10x the 2023 earnings forecast, and it is set to double in price over the next few years.