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Oracle currently operates 98 data center regions and plans to grow that footprint by more than tenfold to somewhere between 1,000 and 2,000 locations over time. The company's OCI will soon offer new clusters featuring over 131,000 of Nvidia's latest Blackwell GPUs, which will pave the way for the most advanced AI applications yet, and potentially drive a new wave of demand.

OCI is Oracle's fastest growing business

Oracle generated $14.1 billion in total revenue during the second quarter, but the OCI segment was responsible for just $2.4 billion of that total, so it isn't a massive contributor yet.

It's still smaller than Oracle's software-as-a-service (SaaS) business, which generated $3.5 billion in revenue during the quarter. It offers ready-made cloud applications to help businesses across dozens of industries manage everything from their inventory to their payroll.

However, OCI is consistently the star performer when it comes to growth. While SaaS revenue grew by 10% year over year during the second quarter, OCI revenue soared by 52%. It was the fastest growth in a year, and it marked the second consecutive quarter of acceleration.

OCI revenue would have grown even faster if Oracle had more data center capacity available, but it's still struggling to meet demand even though it's building infrastructure as quickly as possible.

That demand can be seen in Oracle's remaining performance obligations (RPOs), which soared by 50% during the second quarter to $97 billion. RPOs typically convert into revenue at a future date once the company can deliver the agreed-upon services -- i.e., OCI revenue could surge once it can bring more data centers on line based on the deals it has already locked in.

Oracle CEO Safra Catz predicts RPOs will grow even higher from here because of the sheer volume of deals the company is signing, including a major one with Meta Platforms recently. Meta developed the world's most popular open-source large language models (LLMs) called Llama, which have been downloaded over 600 million times, and the company will shift some of its training workloads over to Oracle's infrastructure.

Oracle has a realistic pathway to the $1 trillion club

Oracle stock trades at a price-to-earnings ratio (P/E) of 40.5, which is a slight premium to the average P/E of Microsoft, Amazon, and Alphabet (36.7). They are three of the biggest operators of AI data center infrastructure besides Oracle:

But Oracle stock looks much more attractive when we measure its value based on its potential earnings. For example, Wall Street's consensus estimate (provided by Yahoo!) suggests the company's earnings per share (EPS) will grow by 14.4% to $7.05 during its fiscal year 2026 (which starts in June of this calendar year). That places its stock at a forward P/E of just 23.5.

Mathematically speaking, Oracle stock would have to soar by 72.3% over the next 18 months just to maintain its current P/E of 40.5, which would value the company at almost $800 billion. If it grows its EPS by 14.4% again in fiscal 2027 and fiscal 2028 while maintaining the same P/E, it will be a $1.04 trillion company.

Even if its P/E settles at 36.7, its valuation would still be around $950 billion.

But Oracle's earnings actually grew by 22% in the first half of fiscal 2025, and I think that pace is likely to persist (and maybe even accelerate), suggesting Wall Street might be too conservative. Remember: The company plans to grow its data center footprint more than tenfold. And its infrastructure is unique because it's fully automated, meaning it should become significantly more profitable at scale.

In fact, during the last couple of quarterly conference calls with investors, Catz talked about how the gross profit margin of the infrastructure business is climbing as more data centers come on line. If Oracle grows its earnings by 22% annually instead of 14% through fiscal 2028, it will be a shoo-in to join the $1 trillion club even if its P/E drops to around 34.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Oracle, and Tesla. The Motley Fool recommends Broadcom, GE Aerospace, and General Motors and recommends the following options: long January 2025 $25 calls on General Motors, long January 2026 $395 calls on Microsoft, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

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