Oracle’s cloud revenue saw an acceleration in Q1 FY2026, demand for AI infrastructure is driving up remaining performance obligations, a significant OpenAI contract is influencing capital expenditure plans, while its valuation and increasing prominence in the S&P 500 are raising important portfolio considerations for institutional investors.
SINGAPORE, Sept. 23, 2025 — ELD Asset Management views Oracle Corporation’s recent financial performance as a pivotal point in the AI infrastructure evolution, noting the company’s cloud operations are gaining significant traction alongside rising capital demands. For the first quarter of fiscal year 2026, concluding in August 2025, total cloud revenue grew 27% year-over-year to $8.11 billion, with cloud infrastructure revenue increasing 54% to $3.72 billion. This demonstrates strong growth that institutional investors can assess in light of impending cost challenges.
Oracle’s multi-cloud database services, integrated with Amazon, Google, and Microsoft, witnessed a significant 1,529% expansion in Q1 FY2026. This growth underscores its strategy of deploying customer workloads on their chosen platforms. Overall group revenue for the quarter rose 12% in USD to $16.78 billion. However, non-GAAP earnings per share came in at $1.65, just $0.01 below analyst expectations. GAAP earnings per share were $1.13, with net income reported at $3.30 billion against operating expenses of $7.03 billion.
The order book for future work is notably expanding. Remaining performance obligations were reported at approximately $455 billion for Q1 FY2026, indicating revenue contracted for recognition over future periods. Capital expenditure surged to $9.57 billion this quarter, almost quadrupling the $2.58 billion spent in the same quarter last year, highlighting the extensive infrastructure expansion necessary to support AI workloads. Jason Harrison, Senior Vice President at ELD Asset Management, remarked, “While the substantial contract backlog offers clear revenue visibility, the ability to execute will be crucial in determining the long-term returns on these considerable investments.”
The concentration of contracts is a key point in investment discussions. Market insights indicate a multi-year agreement with OpenAI, valued at approximately $300 billion over five years starting in 2027, which is a major driver of compute capacity demand. This significant scale provides strategic clarity but also creates a reliance on a single counterparty’s technological direction and financial schedule. Harrison noted, “Meeting substantial, long-term commitments demands meticulous cash allocation prior to revenue recognition, meaning portfolio decisions should account for both growth potential and liquidity characteristics.”
Valuation indicators highlight the extensive reach of the AI market trend. In September 2025, a 36% single-day surge in Oracle’s share price temporarily boosted its market capitalization to approximately $1.25 trillion intraday, before stabilizing around $1.01 trillion as trading consolidated. Its forward price-to-earnings multiple of roughly 45.3 significantly exceeds that of competitors like Amazon (around 31.3) and Microsoft (around 31) for the year-to-date in 2025. Within the broader index, AI-focused companies represent nearly 30% of the S&P 500’s weighting year-to-date in 2025. Research firms attribute about half of the index’s 11% year-to-date gain to this theme and have identified an “AI premium” of approximately 14.2% on valuations. This larger trend also encompasses the evolution of market leaders like Nvidia, whose market capitalization neared $4.51 trillion in 2025, emphasizing investors’ readiness to back companies driving AI infrastructure.
For institutional investors, the critical consideration lies in strategic positioning, not merely reacting to market buzz. The Q1 FY2026 data indicates a blended business model, combining stable software cash flows with a growing AI infrastructure segment. Portfolio allocation strategies will need to balance the potential for growth against factors such as client concentration, execution risk, supply chain limitations, and power access. Ongoing competitive analyses against Amazon, Microsoft, and Google—considering aspects like pricing, performance, ecosystem compatibility, and data sovereignty—will be crucial for securing market share in the coming quarters.
ELD Asset Management concludes that future prospects now hinge on effective execution. Should the order backlog be fulfilled on time and infrastructure development stay within budget, the path to projected earnings appears viable, despite significant capital requirements. However, if client demands or the costs of power and equipment change substantially before 2027, investors will scrutinize whether the current valuation adequately accounts for such risks. Consequently, the upcoming reporting periods will be as important for demonstrating operational efficiency as for reporting top-line growth.
About ELD Asset Management
Founded in 2017, ELD Asset Management Pte. Ltd. (UEN: 201725839Z) offers strategic investment advice based on thorough market research and global macroeconomic analysis. The firm monitors shifts in international markets, enabling clients to foresee opportunities and manage portfolios with precision and strategic focus. Further commentary and updates are available at
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