Oracle nears $1 trillion valuation as CEO Catz’s prediction comes alive
Less than a year after forecasting a trillion-dollar market cap, Oracle’s cloud and AI deals send its stock soaring.
It’s not that Oracle executives didn’t hint at this, they explicitly stated it on several occasions, but investors had a hard time internalizing that the enterprise software veteran could undergo such a transformation.
Larry Ellison’s company, run by Israeli CEO Safra Catz, stunned the capital markets on Tuesday with extraordinary forecasts for its cloud division, sending its stock soaring 35%. Even now, some argue that the nearly 50-year-old company remains undervalued. Although Oracle has not yet entered the trillion-dollar club, it came close during trading, with a 41% surge in shares, the sharpest daily increase in its history. Ellison briefly overtook Elon Musk as the world’s wealthiest person, with his fortune rising to $393 billion compared with Musk’s $385 billion. The surge benefited not only Ellison and Oracle executives but also employees, including the 400 in Oracle’s Israeli development center. (By the way, in the government cloud tender held in Israel about four years ago, Oracle lost to Google and Amazon after a supposedly extensive evaluation process.)
Why is Wall Street suddenly internalizing Oracle’s awakening from its long hibernation in legacy enterprise systems and its readiness for AI-driven cloud battles? The numbers presented by Catz tell a story unseen since Nvidia’s meteoric rise.
According to company forecasts, revenue from cloud infrastructure is projected to reach $144 billion in four years, up from $18 billion in the current fiscal year. This follows a 77% jump this year, from $10 billion last year. In other words, Oracle expects a nearly tenfold increase over five years, driven by massive contracts with major AI players led by OpenAI, which relies on Oracle’s cloud for its operations. Other new Oracle cloud customers include Meta, Elon Musk’s xAI, Nvidia, AMD, TikTok, and Uber.
The company’s bookings, a measure equivalent to a software company’s order backlog, jumped an astounding 359% to $455 billion. Analysts largely overlooked these projections, as Oracle slightly missed revenue expectations for the reported quarter. “We had an amazing start to the year because Oracle has become the go-to place for AI workloads,” Catz told analysts. “We have signed significant cloud contracts with the who's who of AI, including OpenAI, xAI, Meta, NVIDIA, AMD, and many others. At the end of Q1, remaining performance obligations, or RPOs, now top $455 billion.” Ellison, Oracle’s chairman and CTO, added: “AI will change everything. Right now, AI is fundamentally transforming Oracle and the rest of the computer industry, though not everyone fully grasps the extent of the tsunami that is approaching.”
The AI “tsunami” is already making waves, and Oracle’s advantage lies precisely in what might have seemed mundane: its decades-long database operations. While competitors raced to train AI large language models, Oracle realized that the long-term value would not be in training but in inference, the application of AI models to real-world data. With its extensive database experience, Oracle holds the “Holy Grail” required for accurate AI inference: secure, organized corporate data.
Oracle’s cloud allows AI models to access professionally maintained data, enabling reliable business applications rather than the casual experimentation typical of consumer models, where errors are less costly. Many “hallucinations” in ChatGPT, for instance, arise from reliance on unverified online sources like Reddit, Wikipedia, YouTube, and Google.
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Another advantage of Oracle’s cloud is technical performance. Entering the cloud market late allowed Oracle to recruit top talent from existing providers, building a platform that avoids prior mistakes and offers superior efficiency. Oracle’s collaboration with OpenAI highlights that even Microsoft’s Azure alone cannot handle some AI workloads. Interestingly, Oracle is less of a perceived threat to competitors and is even integrated into other cloud providers’ operations, thanks to its secure corporate data capabilities.
Beyond technology, Oracle benefits from veteran leadership. Ellison, 81, has led the company since its inception, and Catz has been with the management team since 1999. “ “We stay focused and maintain a steady course. The fact that Ellison still owns 40% of Oracle has a significant impact,” Catz told Calcalist last year. “Owner-managers have a completely different mindset than hired managers, it’s like the difference between a tenant and a homeowner. A tenant might paint over a crack to hide it, but an owner will inspect the structure, address any engineering issues, and invest in long-term solutions. That long-term planning sets us apart."
“We remain calm,” Catz told Calcalist last year. “Larry’s 40% stake in Oracle ensures a long-term, owner-manager mindset. Unlike an employee manager, who may only paint over cracks, an owner-manager examines the structure, addresses problems, and invests strategically for the future.”
Catz also spoke of her confidence that Oracle would hit a $1 trillion market cap, although perhaps even she didn’t realize it would come so soon. "If we continue on our current trajectory, reaching a valuation of a trillion dollars is inevitable," she stated.
