Should Oracle Stock be in Your Portfolio Post Q4 Earnings?

Oracle ORCL delivered impressive fourth-quarter fiscal 2025 results that exceeded expectations, but investors should exercise caution despite the company's accelerating cloud momentum. (Read More: Oracle Stock Jumps on Q4 Earnings Beat, Upbeat Cloud Forecast)The enterprise software giant's transformation into an AI-powered cloud infrastructure leader is gaining traction, yet current valuations and execution challenges suggest that a measured approach may be prudent.Strong Quarter Masks Underlying Execution RisksOracle reported total revenues of $15.9 billion for the quarter ending May 31, 2025, representing 11% year-over-year growth. The standout performance came from cloud infrastructure services, which surged 52% to $3 billion, building on the previous year's 42% growth rate. Cloud applications revenues grew 12% to $3.7 billion, while total cloud revenues reached $6.7 billion, up 27%.The company's Remaining Performance Obligations hit $138 billion, marking a substantial 41% increase that provides visibility into future revenue streams. This massive contracted backlog, combined with management's guidance for fiscal 2026 total revenues exceeding $67 billion, demonstrates Oracle's strong positioning in the AI-driven cloud transformation.Oracle provided robust guidance for fiscal 2026, expressing strong confidence in accelerating growth rates. The company expects total cloud revenues (applications plus infrastructure) to grow more than 40% in cc, representing a significant acceleration from the 24% growth achieved in fiscal 2025. The Zacks Consensus Estimate for fiscal 2026 revenues is currently pegged at $66.73 billion, suggesting growth of 16.25% from the year-ago quarter’s reported figure. The consensus mark for fiscal 2026 earnings is pegged at $6.68 per share, up 0.6% over the past 30 days.However, Oracle faces significant execution challenges. The company's capital expenditure requirements are escalating rapidly, with management projecting more than $25 billion in fiscal 2026, up from $21.2 billion in fiscal 2025. This substantial investment is necessary to meet overwhelming demand that currently exceeds supply capacity, but it pressures near-term profitability and free cash flow generation.Oracle Corporation Price and Consensus Oracle Corporation price-consensus-chart | Oracle Corporation QuoteAI and Multi-Cloud Strategy Driving MomentumOracle's strategic positioning around artificial intelligence and database modernization is proving effective. The company's multi-cloud database revenues grew 115% from the third quarter to fourth quarter, with 23 multi-cloud datacenters operational and 47 more under construction. The Oracle Autonomous Database consumption revenues increased 47% year over year, while cloud database services overall posted 31% growth.Recent partnerships with Advanced Micro Devices AMD and NVIDIA NVDA strengthen Oracle's AI infrastructure capabilities. The collaboration with AMD introduces MI355X GPUs offering up to 2.8 times higher throughput, while the NVIDIA partnership brings GB200 NVL72 systems capable of scaling to 131,072 GPUs. These alliances position Oracle to capture the growing demand for AI training and inference workloads.The company's database-centric approach to AI provides a competitive moat. Oracle's latest database version, Oracle 23 AI, functions as an AI data platform that can make enterprise data immediately available to popular large language models while maintaining data privacy. This capability becomes increasingly valuable as enterprises seek to leverage AI with their proprietary data sets.Premium Valuation and Competitive PressuresOracle's impressive growth trajectory comes with a premium valuation that requires flawless execution. The stock trades at elevated multiples relative to traditional enterprise software peers, reflecting high expectations for continued cloud infrastructure acceleration. Any disappointment in execution or competitive pressures could lead to significant valuation compression.Oracle trades at a 3-year EV/EBITDA multiple of 26.7x, substantially above the Zacks Computer-Software industry average of 19.24x. This premium valuation suggests that investors have already priced in exceptional future growth — growth that Oracle is increasingly struggling to deliver with modest revenue increases of just 6% year over year (8% in constant currency).ORCL’s EV/EBITDA TTM Ratio Depicts Premium ValuationImage Source: Zacks Investment ResearchThe competitive landscape remains challenging, with Amazon AMZN-owned Amazon Web Services, Microsoft Azure, and Google Cloud maintaining substantial scale advantages in core infrastructure services. While Oracle's specialized focus on database workloads and AI provides differentiation, these hyperscale cloud providers possess greater financial resources and broader service portfolios.Shares of Oracle have gained 29.2% so far this year, outperforming the Zacks Computer and Technology sector’s growth of 1.1%. Shares of Microsoft have returned 12.7% year to date, while Amazon and Google shares have lost 3.3% and 7.7%, respectively.Year-to-Date PerformanceImage Source: Zacks Investment ResearchOracle's success depends heavily on enterprises' willingness to adopt multi-cloud strategies and migrate database workloads to cloud environments. Any slowdown in this migration or increased competitive pressure on pricing could impact growth trajectories and margin expectations.Investment Recommendation: Hold or WaitGiven Oracle's strong fundamental position but current valuation concerns, existing shareholders should maintain their positions while new investors might consider waiting for a more attractive entry point. The company's AI-driven growth story is compelling, and the massive contracted backlog provides revenue visibility, but the premium valuation leaves little room for execution missteps.The upcoming fiscal 2026 will be critical in demonstrating Oracle's ability to convert its record backlog into revenues while managing the substantial capital investment requirements. Investors should monitor quarterly progress on cloud infrastructure growth rates, free cash flow generation, and competitive positioning.Oracle's transformation into a leading AI infrastructure provider appears on track, but the current stock price reflects much of this optimistic scenario. Patient investors may find better risk-adjusted opportunities by waiting for potential market volatility or company-specific challenges that could provide more attractive entry points throughout fiscal 2026. 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Click to get this free report Amazon.com, Inc. (AMZN): Free Stock Analysis Report Advanced Micro Devices, Inc. (AMD): Free Stock Analysis Report NVIDIA Corporation (NVDA): Free Stock Analysis Report Oracle Corporation (ORCL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks