Could Oracle Become More Valuable Than Microsoft by 2030?

Oracle was once considered a slow-growing tech stock, held mainly for its stable returns rather than aggressive gains. The company was one of the largest providers of database software globally, but as this market cooled, Oracle did not transition to cloud services as swiftly as Microsoft, Amazon, and other tech giants. Instead of expanding its business areas, Oracle invested a significant portion of its capital in stock buybacks, which increased earnings per share (EPS) but indicated a lack of growth potential. However, in the past five years, Oracle's stock price has tripled, while the S&P 500 gained less than 90%. Optimism returned as the company expanded its cloud-based services, reduced its reliance on on-premises software, and consistently achieved growing revenues. With a market capitalization of $450 billion, Oracle still lags far behind Microsoft's impressive $3.2 trillion, but could it surpass the tech giant by 2030? From fiscal year 2020 to fiscal year 2024, which ended in May, Oracle’s revenue grew at a compound annual growth rate (CAGR) of 8%, while its EPS grew by 5%. Oracle's EPS was boosted by a one-time tax benefit in fiscal year 2021 but declined the following year after the benefit expired. In fiscal year 2023, revenue was stimulated by the $28 billion acquisition of Cerner, a healthcare IT service provider. Additionally, Oracle bought back 16% of its shares over the past five years. Oracle's long-term strategy aims to foster growth in cloud-based software and infrastructure services to reduce reliance on slower-growing on-premises software. Key growth drivers include the Netsuite and Fusion Enterprise Resource Planning (ERP) services as well as the Oracle Cloud Infrastructure platform. Cerner’s increasingly connected cloud services also play a significant role. In the first quarter of fiscal year 2025, Oracle generated 42% of its revenue from its cloud-based Software-as-a-Service (SaaS) and Infrastructure-as-a-Service (IaaS) segments. The revenue growth of these combined segments was 22% year-over-year, a slight decline from the 23% growth in the fourth quarter of fiscal year 2024. For the full year, Oracle expects double-digit revenue growth, with cloud infrastructure growth anticipated to exceed the 50% from fiscal year 2024. This development is supported by the new Gen 2 Cloud Infrastructure platform, designed to meet the increasing demand for more robust AI services. From fiscal year 2024 to fiscal year 2027, analysts expect Oracle’s revenue to grow at an annual rate of 12% and EPS to grow at 22% per year. Although these growth rates are impressive, the stock is not cheaply valued at 30 times next year’s earnings. Should Oracle maintain this valuation, meet Wall Street's expectations, and increase EPS by 20% annually from 2027 to 2031, the stock price could rise by more than 160% to about $420 by the end of the decade. This would increase the market capitalization to about $1.2 trillion—still less than Microsoft’s current valuation. Microsoft, on the other hand, continues to have many growth drivers. The Azure cloud infrastructure platform is expanding, other cloud services are growing, and Microsoft is integrating numerous generative AI tools from OpenAI into its ecosystem. Additionally, it is expanding the Xbox gaming ecosystem with new cloud-based services and substantial acquisitions. From fiscal year 2024 to fiscal year 2027, Microsoft’s revenue and EPS growth are expected to be 14% and 15%, respectively. The stock also seems expensive, valued at 32 times next year’s earnings, but the market capitalization could grow by nearly 140% to $7.6 trillion by 2030 if Microsoft maintains these performance levels. Therefore, Oracle will not come close to Microsoft’s market capitalization unless Microsoft is broken up by antitrust authorities. Instead of comparing Oracle to Microsoft or other cloud giants, investors should focus on Oracle’s resilience and how the company could continue to outperform the market with its steady long-term growth.