To The Moon

When you think of Oracle, you might picture databases from the 1990s and Larry Ellison in a yacht race. Yet in 2025, the company has reinvented itself as one of the fastest-growing cloud challengers, with a stock that has left the S&P 500 in its wake. The shares are up nearly 70% over the past year, compared with just 20% for the index, and more than 360% over five years. Investors clearly believe $Oracle(ORCL)$ is no longer yesterday’s enterprise software giant but tomorrow’s cloud contender. The question is whether the heavy capex spending and the pivot towards infrastructure-as-a-service are enough to narrow the formidable gap with AWS, Azure, and Google Cloud.

Oracle’s skyline is built on capex and cloud ambition

Capex: Oracle’s hyperscale moonshot

Oracle has been pouring billions into expanding data centre capacity, a move that signals more than ambition — it’s a survival strategy. The company is now spending at a rate that looks disproportionate to its historic revenue base, with capital expenditure ramping up far faster than operating cash flow. Free cash flow has slipped to just $678 million despite operating cash flow of more than $20 billion, an imbalance that underscores how aggressively the company is chasing hyperscale capacity.

Most investors know Oracle’s growth is coming from its cloud push, but what is less appreciated is how much of this expansion is being driven by sovereign cloud demand. Governments and highly regulated industries have become a sweet spot for Oracle Cloud, where data residency and security requirements make AWS and Azure less flexible. If capex continues at its current trajectory, Oracle may not need to catch AWS in absolute size — it could carve out profitable niches where compliance is king.

Cloud revenue: growth momentum or share gains?

The real earnings test lies in the pace of cloud revenue growth. Oracle’s topline is still dominated by software support and licence sales, but cloud services have been posting double-digit gains. Last quarter’s 11% year-on-year revenue growth was encouraging, but against AWS still growing at ~17% and Azure above 20%, it’s fair to ask whether $Oracle(ORCL)$ is genuinely winning share or merely riding broader enterprise IT budgets. For a company with a forward P/E of 34 and capital spending running well ahead of cash generation, 11% won’t cut it for long. Oracle needs sustained mid-teens cloud growth simply to justify the level of investment it is making.

Stock momentum signals lofty bets on Oracle’s cloud acceleration

Here’s a detail often overlooked: Oracle’s cloud revenue mix is skewed toward AI workloads, thanks to high-profile partnerships with Nvidia. Its infrastructure is particularly optimised for GPU-heavy training clusters, which means the growth story is not purely about migration of databases but also about AI-driven demand. If the company can maintain this positioning, it could build a differentiated revenue stream even as overall enterprise adoption begins to slow.

That said, the hyperscalers remain formidable. AWS generated more than $100 billion in annualised revenue, Microsoft’s Azure is closing in on $75 billion, and Google Cloud is above $50 billion. Oracle’s total revenue stands at just $57 billion, with only part of that from cloud. The gulf in scale is massive, and that makes the stakes for every percentage point of growth even higher.

The scale gulf is vast — Oracle’s $27B against giants

Margins: short-term pain, tightrope balance

Investors love cloud businesses for their juicy margins, but Oracle’s path is less straightforward. Operating margins remain strong at over 32%, yet free cash flow conversion has been pinched by the capital buildout. Debt is another factor worth watching, sitting at nearly $109 billion, with a debt-to-equity ratio that would make even a banker sweat. With just $11 billion in cash, Oracle cannot sustain this capex trajectory indefinitely without cloud revenues scaling more aggressively.

The good news is that return on equity is a staggering 82%, reflecting both operational efficiency and a high degree of leverage. The bad news is that such leverage cuts both ways if cloud demand slows. The real window to prove that this investment strategy works is not a few quarters but realistically 12–18 months. If cloud revenues don’t accelerate meaningfully by then, the debt story could begin to overwhelm the growth narrative. Oracle is effectively walking a tightrope: leaning forward may deliver scale, but one stumble would be costly.

Valuation: priced for perfection?

Oracle now trades at a forward P/E of 34, hardly cheap for a company still viewed by some as a latecomer to cloud. Yet the stock’s trajectory — up more than 230% in three years — suggests that investors are already baking in a successful cloud pivot. Enterprise value-to-revenue at over 13x puts Oracle in rarefied territory, closer to $Microsoft(MSFT)$ than legacy software peers.

What gives me pause is the narrow cushion between current valuation and execution risk. Any stumble in cloud growth or a slowdown in AI-driven demand could expose the shares to a sharp rerating. On the other hand, if Oracle continues its streak of beating expectations and carving out specialised niches, the multiple may prove justified.

Oracle walks the fine line between growth and leverage

Verdict: cloud with a silver lining

Oracle today is not the Oracle of a decade ago. The company has embraced capex intensity, leaned into cloud specialisation, and struck smart partnerships that align it with the AI boom. Its returns versus the S&P 500 over the past five years are breathtaking, proving that sceptics underestimated its resilience. Still, this is not a free ride: debt is heavy, cash flow conversion is thin, and the hyperscalers aren’t exactly rolling over.

In my view, $Oracle(ORCL)$ is best seen as a selective play on differentiated cloud growth rather than a direct competitor to AWS or Azure. It won’t win the market on scale, but it might win on specialisation, compliance, and AI-focused infrastructure. For investors, the trade-off is clear: accept short-term volatility and margin pressure in exchange for exposure to a company that has already reinvented itself once — and just might do it again.

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