Oracle's Data Center Spending Is Exploding. Here's the Power Stock That Actually Benefits.

Technology company Oracle (NYSE: ORCL) builds the core underlying enterprise technology, including software, cloud, and hardware, that large corporations, banks, healthcare providers, and governments use to run their daily operations.

As Oracle expands its cloud and artificial intelligence (AI) infrastructure, Bloom Energy (NYSE: BE) has emerged as its single largest specialized power partner, securing a massive deal in April to supply up to 2.8 gigawatts (GW) of on-site fuel cell electricity.

Because public electrical grids take years to approve and connect massive industrial loads, Oracle relies on a mix of traditional utility grids, clean energy developers, and fast-deploying, on-site solutions, but Bloom is the largest part of that mix, especially because its fuel cells can generate electricity with minimal emissions.

Under a master services agreement, Oracle contracted for an initial 1.2 GW of solid oxide fuel cell capacity, which scaled up to 2.8 GW. Because Bloom's natural gas-fueled power servers can be installed directly on-site in as little as 55 to 90 days, they allow Oracle to bypass standard grid queue bottlenecks.

Bloom's connection to Oracle is a good thing, but there are other reasons why Bloom's stock is an attractive buy.

Image source: Getty Images.

The company's growth has reached a tipping point

In the second quarter, Bloom reported record revenue of $1.065 billion, up 166% year over year. The company now says it expects full-year revenue of $3.9 billion to $4.2 billion, up 100% over 2025.

The company is also turning the corner on profitability, with earnings per share (EPS) of $0.62, up from a loss of $0.18 in the same period a year ago.

For years, the bear case against fuel cell providers was a lack of consistent profitability, but Bloom's financial profile has fundamentally transformed. Spurred by a surge in product deliveries, Bloom's gross margins expanded by 668 basis points to 33.4% in Q2.

The company is generating strong positive operating cash flows, allowing it to fund its manufacturing expansion out of cash flow rather than relying on heavy equity dilution.

Oracle is just one of its customers

Bloom's fuel cells offer several advantages to companies that need stable power sources. Its cells can be operational within months, offer up to 60% electrical efficiency, deliver power with lower emissions, and have a small footprint that is ideal for dense AI data center environments.

The company has several major customers, including top hyperscalers, hospitals, cloud providers, financial firms, and large retail companies. In June, it announced it was expanding its partnership with the investment firm Brookfield for $25 billion.

One of Bloom's longest-standing and largest deployment partners is data center operator Equinix (NASDAQ: EQIX), which has installed more than 100 megawatts (MW) of Bloom Energy Servers across dozens of International Business Exchange (IBX) data centers in the U.S. to ensure uninterrupted uptime for its enterprise tenants.

Pricey, yes, but look down the road

The one concern about Bloom is its high valuation. The stock has risen more than 146% so far this year, and it is trading at roughly 290 times trailing earnings and for more than 78 times forward earnings. However, it is on pace to double yearly revenue, and its gross margin has steadily increased as it has become more efficient.

Renewables and behind-the-meter power sources, such as fuel cells, are gaining ground as cost-effective and time-saving solutions amid growing grid constraints. According to a report from Research and Markets, the fuel cell market is expected to grow at an annual rate of 20%, reaching $28.4 billion by 2031.

Bloom's fuel cells can be deployed easily, and as companies' energy needs expand, Bloom's plug-and-play fuel cells are a scalable, cost-effective solution.

James Halley has positions in Equinix. The Motley Fool has positions in and recommends Bloom Energy, Equinix, and Oracle. The Motley Fool has a disclosure policy.