Can Oracle Become a $1 Trillion Company?

Oracle's (NYSE: ORCL) market cap almost reached $1 trillion in September of last year, but now, it has fallen to below $500 billion. Its fundamentals remain good amid the AI boom, but the company has laid off 13% of its workforce over the past year. Here's what all of those details mean for the stock.

Oracle is trading workers for higher AI spending

The layoffs came as Oracle accelerated its capital expenditures on artificial intelligence infrastructure.

Following in the footsteps of numerous tech giants that are freeing up as much capital as possible for AI investments, it expects to spend $70 billion on capex in its current fiscal year, which ends in May 2027. So far, this strategy has yielded meaningful growth.

Oracle delivered 21% year-over-year revenue growth in its fourth quarter of fiscal 2026, which ended May 31. Notably, the cloud infrastructure segment was up by 93% year over year. That unit made up about 30% of Oracle's total revenue, so if it continues to outperform, the whole company's top-line growth should accelerate in future quarters.

For the fiscal year, cloud infrastructure sales were up by 77%. That should serve as a green light for Oracle's AI spending, especially with the company also achieving earnings of $1.45 per share in the latest quarter, a record high.

Cloud infrastructure is the main reason Oracle has a shot at a $1 trillion valuation. Its software business dipped by 2% year over year and accounted for more than one-third of total revenue.

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The remaining performance obligations question

Oracle wrapped up its fiscal 2026 with $638 billion in remaining performance obligations. That figure was up by 363% year over year, and it's now higher than Oracle's market cap. If it can transform that promise into revenue over multiple years while gaining market share, it would be a major tailwind for the stock, but there is a major risk that must be addressed.

More than $300 billion of that backlog comes from an OpenAI contract for cloud computing capacity that will start in 2027 and last for five years. That averages to $60 billion per year, and none of the underlying numbers to support the agreement make sense.

OpenAI reported a $38.5 billion net loss in 2025. Its Q1 2026 revenue was $5.7 billion, but that came along with a net cash burn of $3.7 billion. This all shows that OpenAI wouldn't be able to afford the Oracle deal even if it had a net profit margin of 100% -- and its net losses are expected to continue for years.

It's true that OpenAI is planning an IPO for the fourth quarter of this year, which may be the route it takes to raise the funds it would require to cover that big contract.

If OpenAI can perform a financial miracle or raise the funds from somewhere that would allow it to fulfill its end of that $300 billion bargain, Oracle could realize the expected revenue from that agreement. If that happens, Oracle should be on its way to a $1 trillion valuation, but its success in AI doesn't entirely hinge on its relationship with OpenAI. The company's top line is still growing at a high rate, and it should continue to do so.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Oracle. The Motley Fool has a disclosure policy.