In three years, revenue "doubled," Oracle became the "new Nvidia"

The explosive growth prospects are transforming Oracle from a traditional database company into a core player in the wave of AI infrastructure.

In the recently released Q1 financial report, Oracle boldly predicts that its revenue will double in the next three years, making it a hot "new Nvidia" in the eyes of investors.

The report shows that its remaining performance obligations (RPO, or revenue from signed contracts that has not yet been recognized) grew more than twofold in three months, reaching $455 billion. Equally surprising is Oracle's claim that there are more deals worth billions of dollars currently in negotiation, which will soon push this figure past the $500 billion mark.

This sharp rise in contract revenue is primarily driven by the enormous demand for AI computing power from giants like OpenAI, prompting Oracle to make extremely bold predictions for the coming years. Currently, Oracle expects its cloud infrastructure revenue to reach $114 billion by fiscal year 2029, while the figure was only over $10 billion as of the fiscal year ending in May this year.

Boosted by this news, Oracle's stock price, which has already risen 45% this year, soared another 35% on Wednesday, nearly doubling in price this year, with the company's market value approaching $950 billion. According to FactSet, the company recorded its largest single-day gain since the 1990s on Wednesday.

Placing Big Bets Amid Uncertainty

In reality, making long-term predictions in a rapidly changing technology trend like AI may not be wise.

Even Nvidia, considering the uncertainties, typically avoids forecasting sales or profits beyond a single quarter. Oracle's biggest competitors in the cloud and AI services space—Microsoft, Google, and Amazon—do not even list AI-related revenue separately in their financial statements.

However, what sets Oracle apart is that it is still led by Chairman Larry Ellison. For decades, despite running a company that handles some of the most "boring" businesses in computing alongside CEO Safra Catz, he has remained one of Silicon Valley's boldest figures.

Oracle's optimistic outlook not only reflects Ellison's boldness but also the confidence of leaders in the AI field regarding the sustainability of this trend.

The Key is Whether RPO Can Be Converted into Revenue

Oracle's positive forecast is based on its massive order backlog.

However, having contracts is one thing; successfully converting them into actual revenue in the coming years is another. Turning paper commitments into tangible cash flow is a process fraught with challenges For Oracle, whether it can convert the remaining performance obligations into revenue depends on the company's ability to build a network to fulfill these contracts. This requires power, licenses, and key equipment that is in high demand and continuously in short supply, such as NVIDIA GPUs.

Significant technological advantages, strong demand for inference, and support from NVIDIA...

Despite the challenges Oracle faces in its execution path, and the capital expenditures of competitors like Amazon, Google, and Microsoft far exceeding its record $35 billion planned for this fiscal year, analysts believe Oracle has its own strong advantages.

Scotiabank analyst Patrick Colville noted in a report on Wednesday that Oracle possesses "top-notch technical expertise, ample funding, deep support from NVIDIA, and independence, which enables it to fully capitalize on the rapidly growing demand in the field of AI training and inference."

The analysis also pointed out that Oracle's growth is largely related to the AI inference segment.

As the focus of AI shifts from training better models to deploying them to millions of new users, inference activities are expected to increase significantly, potentially providing Oracle with a more stable source of revenue.

Despite the bright prospects, Oracle has also set itself extremely challenging goals. Its current forward price-to-earnings ratio has reached about 48 times, and the company's own forecasts indicate that AI computing will account for the vast majority of its total revenue in the coming years.

This means that, compared to its competitors, Oracle's future is more closely tied to the sustainability of the AI boom. If AI demand eventually cools, diversified giants like Microsoft will still have their large spreadsheet and other businesses to rely on, but Oracle's fate will be more directly impacted