Prediction: This Unstoppable Stock Could Join the Trillion Dollar Club in the Next 5 Years

Actions of Oracle (ORCL 1.09%) have been in red-hot form in the stock market in 2024, up 56% at the time of writing. Investors bought shares of this database software provider because of its improved credentials in the artificial intelligence (AI) market.

The company’s recent results have been solid, and Oracle is set to report double-digit revenue growth in the current fiscal year. Its revenue stream is growing at an incredible pace due to strong demand for its cloud infrastructure solutions.

It’s also worth noting that Oracle recently held a meeting with financial analysts on September 12, and a closer look at management’s long-term forecast indicates that this cloud company could be on track to achieve a valuation of a trillion dollars over the next five years. .

Here are some reasons why Oracle is likely to become a trillion dollar company.

Oracle is going after the cloud AI market

Oracle currently has a market cap of $455 billion, meaning it needs to grow another 120% to enter the trillion dollar club. The stock could easily appreciate that much as demand for its cloud infrastructure from customers looking to train and deploy AI applications has gone through the roof.

In fiscal 2024 (which ended May 31), Oracle’s cloud infrastructure revenue grew 51% year over year and outpaced the 6% increase in its total revenue. When Oracle released its fiscal fourth-quarter results in June, the company pointed out that it was witnessing “tremendous demand for training large AI language models in the Oracle Cloud.” This strong demand led to a 44% year-over-year increase in Oracle’s remaining performance obligations (RPO) in Q4 to $98 billion.

When Oracle released its fiscal 2025 Q1 results earlier this month, it reported stronger year-over-year growth of 53% in its RPO to a record $99 billion. RPO refers to the total value of a company’s future contracts, so the extraordinary increase in this metric is good news for Oracle investors, suggesting that the company’s revenue volume is improving.

It’s also worth noting that Oracle saw a 162% increase in cloud AI customers in the first quarter of fiscal 2025, and the company increased its AI infrastructure capacity by 258%.

Chairman Larry Ellison remarked on the company’s latest earnings conference call:

Oracle has 162 cloud data centers, active and under construction worldwide. The largest of these data centers is 800 megawatts and will contain acres Nvidia GP clusters capable of training the world’s largest AI models. This is what it takes to stay competitive in the race to build one, just one of the most powerful artificial neural networks in the world.

The stakes are high and the race is on. Soon, Oracle will start building data centers that are more than one gigawatt.

Oracle is clearly trying to do everything it can to capitalize on the rapidly growing demand for AI services in the cloud. Goldman Sachs estimates that generative AI could drive $200 billion to $300 billion in cloud spending by the end of the decade, which explains why Oracle is now looking to ramp up capital spending to capture share greater than the opportunity offered by the final market.

The company has planned $15 billion in capital spending for the current fiscal year, which would more than double the $7 billion in capital spending in the previous fiscal year. Oracle says it’s building its cloud capacity so it can turn bookings into revenue and profits at a faster pace, which likely explains why the company has set an ambitious target for revenue and earnings growth over the long term long.

Why a trillion dollar market cap looks like a possibility

Oracle expects its revenue to nearly double over the next five years. Specifically, the company anticipates revenue of at least $104 billion in fiscal 2029, up from $53 billion in fiscal 2024. In addition, management is forecasting at least 20% annual growth in its earnings per share during this period. By comparison, Oracle’s earnings per share have grown at an annual rate of just under 10% over the past five years.

Oracle ended fiscal 2024 with earnings of $5.56 per share. Based on that number, its profit could jump to $13.84 per share after five years. Multiply projected earnings by Nasdaq-100 The forward earnings multiple of the index of 29 (using the index as a proxy for tech stocks) points to a stock price of $401 after five years. That would be a 144% increase from current levels, which would be enough to send Oracle into the trillion dollar club.

With the company’s stock currently trading at 27 times forward earnings, investors are getting a good deal on this AI stock that they wouldn’t want to miss out on given the substantial upside it could offer on long term.