Enterprise software and cloud giant Oracle (NASDAQ:ORCL) has witnessed impressive momentum in its stock price over the past nine months. Despite lagging behind the S&P 500 last year, it has more than made up for it with a 21.3% jump year-to-date (YTD). The results may have surprised many, considering its missed top-line estimates in the past three quarters. Despite recent sluggish growth rates, the excitement around its backlog and recent breakthrough AI deals points to more upside ahead. Additionally, the recent dip in its stock price makes Oracle an attractive buy.

Oracle stock was relatively laggard compared to its peers in the AI and cloud computing sectors. However, recent reports indicate superb progress in both realms, with Oracle expected to benefit from synergies in cloud and AI. Therefore, despite the recent bullish momentum, there’s plenty of reason to believe that Oracle will continue notching new highs.

With that said, let’s delve deeper into why Oracle is poised to be a clear winner in the cloud and AI race.

The AI Partnership Wave: OpenAI and Beyond

A post-earnings dip was on the cards for Oracle after posting fourth-quarter (Q4) revenue and earnings misses, but the opposite occurred. Its impressive forward projections for double-digit expansion in fiscal year (FY) 2025 and a series of major AI deals overshadowed the shortfalls, significantly increasing investor confidence.

Perhaps the biggest of those deals was with OpenAI to provide additional cloud capacity, despite the generative AI pioneer’s relationship with Microsoft (NASDAQ:MSFT). This was one of 30 major AI deals Oracle signed in Q4, with its remaining performance obligation surging 44% to nearly $100 billion. Those 30 new AI contracts were worth over $12 billion this quarter alone, significantly adding to its bull case.

Following the OpenAI deal, Piper Sandler deemed Oracle a “high conviction idea” in enterprise software despite the sluggishness in the AI space. OpenAI will now leverage Oracle’s massive database technologies and scalable Oracle Cloud Infrastructure (OCI) to advance its lofty AI endeavors. Piper Sandler expects the deal to attract more high-profile collaborations, enhancing Oracle’s market competitiveness.

Moreover, CEO Safra Catz announced a multi-cloud partnership with Google in a similar deal. The partnership will integrate Oracle’s powerful database services within Google Cloud across ten regions. Therefore, with such high-profile collaborations, Oracle stands to become a foundational player in the AI infrastructure landscape.

Cloud and AI: Fueling Oracle’s Next Growth Frontier

Oracle’s top line was driven mainly by software licenses, especially its database and middleware solutions. However, over the past decade, we’ve seen a dramatic shift towards its robust cloud-based services. For context, in 2014, its cloud infrastructure-as-a-service and cloud software subscriptions accounted for 28.8% of sales. As per last year’s numbers, cloud licenses have soared to 82.2%, indicating a seismic shift in Oracle’s business model towards cloud dominance.

Oracle’s key partnerships and cloud integration efforts have proven critical in powering its growth strategy. Partnerships with giants like Nvidia (NASDAQ:NVDA), Microsoft, Google, and xAI have enabled Oracle to integrate its cloud and data solutions across various platforms.

Additionally, Oracle’s cloud services support various applications, from AI to enterprise data management. Moreover, by interconnecting with other clouds, such as Microsoft Azure and Google Cloud, Oracle’s infrastructure remains a cornerstone for multiple tech environments. Oracle’s link with the leading cloud providers cements its positioning as a mission-critical player as platforms evolve, enhancing performance and efficiency for AI and large database applications.

Final Word on Oracle Stock

Oracle has been on quite a run over the past nine months, leaving its competition in the dust. Despite its uninspiring start to the AI race, Oracle’s Q4 report has shown superb momentum in this area.

With a growing backlog and breakthrough AI deals, Oracle stock stands poised for even bigger gains. Moreover, its collaborations with AI giants in OpenAI and Google add to its competitiveness while solidifying its AI and cloud computing position. Moreover, with a strategic slant towards cloud dominance and key partnerships, Oracle remains positioned remarkably ahead.

Wall Street concurs, attracting a moderate buy rating from 26 analyst ratings. Price targets range from a low of $105 to a high of $175, with an average of $149.32, pointing north of 17% from its current price.

On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.