What Do Oracle’s 22% Surge and AI Deals Mean for Shares in 2025?

If you are sitting on Oracle shares or considering jumping in, you are probably weighing what comes next after such an eye-popping surge. Over the past week alone, Oracle stock has soared 22.5%, with this month stacking on another 17.7%. The Year-to-Date return is even more dramatic at 76.0%, and if you zoom out to three or five years, the numbers only look stronger: 340.5% and 416.2%, respectively. That kind of sustained performance is rare in the tech sector, especially for a company with Oracle's established history. It has a lot of investors asking whether there is real value left or just momentum-driven hype.

Recently, broader market optimism around artificial intelligence and cloud infrastructure has helped push Oracle to new highs, with investors betting that the company still has durable growth in those business areas. There is clear enthusiasm, but as always, the trick is to figure out if the stock is priced too far ahead of its fundamentals or if the market might actually be underestimating Oracle's true value.

To cut through the noise, I have run Oracle through a six-point valuation check. Oracle scores a 3 out of 6, meaning it looks undervalued on half of the standard metrics. A deeper dive is coming up: we are about to look at multiple valuation approaches side by side, and I will finish with what may be the most important lens to use when thinking about Oracle’s true worth.

Oracle delivered 73.3% returns over the last year. See how this stacks up to the rest of the Software industry.

Approach 1: Oracle Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's true value by projecting its future cash flows and then discounting them back to today's value, reflecting the time value of money. Essentially, it aims to calculate what all future profits are worth in today's dollars.

For Oracle, the latest twelve-month Free Cash Flow (FCF) stands at $5.84 Billion. Analysts project this to grow substantially, reaching nearly $139.08 Billion by 2035, with intermediate years showing significant upward movement. For example, $22.99 Billion by 2029.

While analyst forecasts cover up to five years, projections beyond that are extrapolated to capture long-term potential. The use of a two-stage Free Cash Flow to Equity model in this context helps account for both the initial growth phase and a more mature, stable period.

This DCF approach suggests an intrinsic value of $482.33 per share. With Oracle currently trading at a 39.4% discount to this estimated fair value, the model indicates the stock is meaningfully undervalued at today's prices.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Oracle.

Our Discounted Cash Flow (DCF) analysis suggests Oracle is undervalued by 39.4%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Oracle Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used valuation metric for established, profitable companies because it directly compares a company's current share price to its earnings per share. For businesses like Oracle that consistently generate profits, the PE ratio provides a quick snapshot of how much investors are willing to pay for each dollar of earnings.

It's important to note, though, that what counts as a "fair" PE ratio depends on factors like expected future growth and risk. Higher growth companies or those deemed less risky typically justify higher PE ratios, while slower-growing or more volatile companies trade at lower multiples.

Currently, Oracle trades at 66x earnings, which is higher than the Software industry average of 35x and just below its peer average of 75x. This might seem expensive at first glance, but plain comparisons can overlook company-specific factors.

That's where Simply Wall St's proprietary Fair Ratio comes in. The Fair Ratio, calculated as 58x for Oracle, integrates key elements such as Oracle's projected earnings growth, its risk profile, strong profit margins, position in the Software industry, and its market capitalization. This tailored approach is more meaningful than a simple peer or industry comparison since it personalizes the benchmark to Oracle’s unique characteristics.

With Oracle's actual PE of 66x being moderately above its Fair Ratio of 58x, the stock looks somewhat expensive relative to its underlying fundamentals.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Oracle Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a simple, yet powerful tool that allows you to tell your own story behind a company's numbers by combining your view of a business’s future (like Oracle’s revenue, earnings, and profit margins) with key financial forecasts and a fair value estimate.

Narratives bridge the gap between what a company is doing, what you believe it can achieve, and how that connects to the company’s valuation. This approach makes your investment decision more personal, logical, and dynamic.

On Simply Wall St’s Community page, Narratives are easy to access and are already being used by millions of investors to compare their assumptions, track changing fundamentals, and see how new information from news or earnings updates affects Oracle’s fair value in real time.

This means you can judge, at a glance, whether Oracle is currently a buy or sell for you based on your own Narrative by comparing its fair value to the current share price. You can also adjust quickly as new company data emerges.

For example, one user’s Narrative might value Oracle at $325 per share by forecasting rapid AI and cloud adoption, while another, focusing on competitive risks, might conclude it should be worth just $183. This demonstrates how perspectives and assumptions drive different investment choices.

Do you think there's more to the story for Oracle? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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