Oracle's AI-Fueled Growth Silences Doubters -- for Now

Oracle (NYSE: ORCL) might well be the Rodney Dangerfield of cloud providers -- "I don't get no respect." Despite reporting better-than-expected results for two consecutive quarters, the stock has fallen 54% over the past six months. Soaring capital spending and fears about a slowing in demand for artificial intelligence (AI) have weighed on the cloud infrastructure and AI provider.

After the market closed on Tuesday, Oracle reported its results, and the stock is finally getting a little love, climbing roughly 11% in after-hours trading.

Image source: The Motley Fool.

Robust results and a stunning backlog

Oracle reported the results of its fiscal 2026 third quarter (ended Feb. 28), and both sales and profit growth came in ahead of expectations. Revenue of $17.2 billion climbed 22% year over year, fueling adjusted earnings per share (EPS) that increased 21% to $1.79. For context, analysts' consensus estimates were calling for revenue of $16.9 billion and EPS of $1.70, so Oracle surpassed those benchmarks with room to spare.

The company's cloud segment grew 44% year over year to $8.9 billion, and now accounts for more than half of Oracle's total sales. The vast majority of that rise came courtesy of Oracle Cloud Infrastructure (OCI) -- which competes in cloud computing with the likes of Amazon Web Services, Alphabet's Google Cloud, and Microsoft Azure -- which grew 84% year over year in the current quarter.

Oracle's backlog was the centerpiece of the results. CEO Safra Catz revealed that the company's remaining performance obligation (RPO) -- a backlog of future sales -- rose to $553 billion, surging 325% year over year. Driving the increase was several "large-scale AI contracts" signed during the quarter.

Moreover, Oracle noted that the increase in RPO won't require the company to raise any incremental funds to support these contracts, as they are either funded upfront by the customer or they will buy the graphics processing units (GPUs) and supply them to Oracle. The company went on to say that "the demand for cloud computing for AI training and inferencing continues to grow faster than supply."

For the upcoming fourth quarter, Oracle's outlook calls for revenue of $19 billion at the midpoint of its guidance, which would represent year-over-year growth of 20%, or 19% in constant currency. Oracle is also forecasting cloud revenue of $13 billion, an increase of 48% at the midpoint, or 46% in constant currency. This would result in adjusted EPS of $1.98, up 16% in U.S. dollars. Oracle maintained its full-year fiscal 2026 revenue forecast of $67 billion but raised its fiscal 2027 outlook by $1 to $90 billion.

Finally, the board of directors declared a dividend of $0.50 payable on April 24 to shareholders of record as of April 9. That works out to a current yield of 1.3%. With a payout ratio of just 36%, there are plenty of resources for future increases.

Despite its consistently strong performance and robust backlog, Oracle stock is still attractively priced at 28 times earnings.

Danny Vena, CPA has positions in Alphabet, Amazon, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, and Oracle. The Motley Fool has a disclosure policy.