Most investors think the artificial intelligence boom belongs to chipmakers like NVIDIA or cloud giants such as Microsoft. But training and running AI models requires far more than chips. It requires massive data centres, high-performance computing clusters, and databases capable of managing enormous datasets.

That’s where Oracle Corporation may quietly be one of the biggest beneficiaries of the AI boom. The market still largely sees Oracle as a legacy database company. Increasingly, it’s becoming something else: a high-performance cloud infrastructure provider.

The business: explained simply

Oracle sells the systems large organisations use to store and manage their data.

The company generates roughly US$52B in annual revenue across three main areas:

Cloud Services and License Support The core business, contributing around US$39B, or roughly 75% of total revenue.
Cloud Infrastructure (OCI) Oracle’s fastest-growing segment, expanding roughly 40–50% year-on-year as enterprises move workloads into the cloud.
Hardware and Services A smaller legacy segment contributing roughly US$5–6B annually.

Oracle’s key advantage is its enormous installed base of customers already running Oracle databases. When these companies move their systems to the cloud, migrating to Oracle Cloud Infrastructure (OCI) is often the easiest path.

The moat

Oracle’s competitive advantage is switching costs.

Enterprise databases sit at the centre of corporate systems. Replacing them can take years and cost millions of dollars. Because of this, companies using Oracle databases tend to remain customers for decades.

That installed base becomes extremely valuable during the cloud transition. Instead of competing for entirely new customers, Oracle can migrate existing ones to its own cloud platform.

What the financials say

Oracle remains an extremely profitable company despite investing heavily in cloud infrastructure.

Recent financials show:

Revenue: ~US$52B
Operating income: ~US$19B
Net income: ~US$10–11B
Free cash flow: ~US$15B

Operating margins sit around 36%, significantly higher than many technology peers.

That profitability gives Oracle the financial firepower to build new data centres and compete with the largest cloud providers.

The AI angle

The AI boom may become Oracle’s biggest growth driver.

Training large AI models requires massive computing clusters capable of running thousands of GPUs simultaneously. Oracle has built specialised AI superclusters designed specifically for these workloads.

Demand for AI computing infrastructure is growing rapidly. Even capturing a small share of this market could significantly accelerate Oracle’s growth.

A simple growth scenario

Oracle currently generates roughly US$52B in revenue and about US$10–11B in net income.

If the company grows revenue at roughly 9% annually, total revenue could reach around US$80B by 2030.

Assuming operating margins remain near 36%, that would imply net income approaching US$22B, or roughly US$8 per share based on current share counts.

Applying a conservative 25× earnings multiple would suggest a long-term valuation near US$200 per share.

That scenario does not require Oracle to dominate the cloud market. It simply assumes continued migration of existing customers to OCI while capturing part of the expanding AI infrastructure market.

Fair value

Oracle currently generates roughly US$52B in annual revenue and about US$10–11B in net income. If the company can sustain roughly 8–10% revenue growth, total revenue could reach around US$80B within the next five years.

Assuming net margins remain near 25%, that would imply net income of roughly US$20B, or around US$7–8 per share based on the current share count.

Applying a conservative 25× earnings multiple, in line with large enterprise software peers, suggests a potential long-term valuation in the range of US$180–200 per share.

This scenario does not require Oracle to dominate the cloud market. It simply assumes continued migration of its installed database base to Oracle Cloud Infrastructure while capturing a modest share of the rapidly expanding AI infrastructure market.

Risks

Oracle faces intense competition from major cloud providers including:

Amazon Web Services
Microsoft
Alphabet

These companies currently operate larger global cloud platforms.

There is also execution risk. Expanding cloud infrastructure requires enormous capital investment, and Oracle must continue scaling its data centre network successfully.

The bottom line

Oracle generates more than US$50B in revenue, produces billions in free cash flow, and controls one of the most widely used enterprise database platforms in the world.

If the company successfully converts its installed customer base to its cloud platform while capturing a portion of the rapidly expanding AI infrastructure market, earnings could grow significantly over the next decade.

For investors willing to look beyond the perception of Oracle as a legacy software company, the real story may be a profitable technology giant quietly reinventing itself for the AI era.

Disclaimer

The user Mdeegan has a position in NYSE:ORCL. Simply Wall St has no position in any of the companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.