Key Points

• The cloud infrastructure space got a jump start thanks to the surge in demand for AI.

• Oracle Cloud Infrastructure (OCI) recently signed a flurry of deals that could take its business to the next level.

• The company is on a path to become one of the world’s largest cloud providers.

• 10 stocks we like better than Oracle ›

The advent of modern cloud computing is largely attributed to Amazon, which pioneered cloud infrastructure services with the introduction of Amazon Web Services (AWS) in 2002. The industry has evolved over time, but the basics remain the same: Providers offer on-demand, scalable computing, software, data storage, and networking capabilities to any business with an internet connection.

After a period of slower growth, the cloud infrastructure space got a jump start thanks to recent developments in the field of artificial intelligence (AI). However, the large language models that underpin the technology require a great deal of computational horsepower, which typically isn’t available outside a data center. As a result, the demand for cloud infrastructure services has skyrocketed in recent years, and it’s expected only to grow from here.

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Recent developments suggest there could be a big shakeup coming to the cloud infrastructure space, led by technology stalwart Oracle (NYSE: ORCL).

Image source: Getty Images.

Skyrocketing demand for Oracle Cloud

While the company is primarily known for its flagship Oracle Database, it offers customers a growing suite of enterprise software, integrated cloud applications, and cloud infrastructure services.

Oracle Cloud Infrastructure (OCI) has long trailed the Big Three cloud providers. To close out the calendar second quarter, AWS, Microsoft Azure, and Alphabet‘s Google Cloud controlled 30%, 20%, and 13% of the market, respectively, according to data compiled by Statista. Oracle ran a distant fifth with 3% of the market.

Yet, recent developments suggest a paradigm shift in the status quo. When Oracle released the results of its fiscal 2026 first quarter (ended Aug. 31), the headline numbers were largely business as usual. Total revenue grew 11% year over year to $14.9 billion, while its adjusted earnings per share (EPS) of $1.47 grew 6%.

However, investors were taken aback by the magnitude of Oracle’s backlog, as its remaining performance obligation (RPO) — or contractual obligations not yet included in revenue — surged 359% year over year to $455 billion. Perhaps more impressive is the $317 billion in contracts signed during the first quarter alone.

Oracle’s position as a trusted partner to enterprise made it “the go-to place for AI workloads,” according to CEO Safra Catz. If that wasn’t enough, she went on to say, “We expect to sign-up several additional multi-billion-dollar customers and RPO is likely to exceed half-a-trillion dollars.”

Breaking down that backlog shows that Oracle will be reaping the benefit of those deals for years to come:

• Fiscal 2026 cloud revenue of $18 billion, up 77%
• Fiscal 2027 cloud revenue of $32 billion, up 78%
• Fiscal 2028 cloud revenue of $73 billion, up 128%
• Fiscal 2029 cloud revenue of $114 billion, up 56%
• Fiscal 2030 cloud revenue of $144 billion, up 26%

The company notes that the majority of the revenue in this outlook is already booked in RPO, so there are contracts backing these forecasts. If Oracle is able to reach these lofty benchmarks, and that’s still a big if, OCI will join the big leagues of cloud infrastructure and could potentially unseat one or more of the Big Three.

A changing of the guard?

As previously stated, Amazon, Microsoft, and Google top the list of cloud infrastructure providers, so it helps to see where they stand. During the first six months of 2025, AWS generated revenue of $60.1 billion, up 17%, suggesting a run rate of $120 billion. During the same period, Google Cloud’s revenue came in at $25.9 billion, up 30%, suggesting a run rate of about $51.8 billion. Microsoft doesn’t generally break out Azure’s revenue, but it recently revealed that for fiscal 2025 (ended June 30), Azure surpassed $75 billion in revenue, up 34%.

Given the limitations, this is obviously not an apples-to-apples comparison, but it provides us with a starting point. Taking these extrapolated figures and applying their most recent growth rates over the coming four years, here’s where the Big Three would stand by the end of calendar 2029 compared to Oracle:

• AWS: $225 billion
• Azure: $241 billion
• Google Cloud: $157 billion
• Oracle: $144 billion

Using our imperfect information and assuming Oracle can turn its RPO into cloud revenue, this exercise shows a path for OCI to mount a challenge to the Big Three over the next five years.

To be clear, this is fun with numbers, and life doesn’t occur in a vacuum. All of our cloud infrastructure providers will likely grow more quickly or more slowly than our examples suggest. One of the upstart neocloud providers could capture an outsize portion of the market. There are plenty of other examples of what could go very right or very wrong, but you get the idea.

To buy or not to buy?

The recent surge in Oracle’s stock price has had a commensurate impact on its valuation, which appears lofty at first glance. The stock is selling for 38 times next year’s earnings, which is certainly a premium. However, using the more appropriate forward price/earnings-to-growth (PEG) ratio, which accounts for the company’s growth trajectory, the multiple comes in at 0.8, when any number less than 1 is the standard for an undervalued stock.

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Danny Vena has positions in Alphabet, Amazon, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, and Oracle. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Disclosure: Penske Media Corporation is an investor in Vox Media, The Verge’s parent company.

Penske Media Corporation, the publisher of Rolling Stone and The Hollywood Reporter, has become the first major American media company to sue Google over its AI summaries. The company claims that the AI Overviews that often appear at the top of search results leave users with little reason to click through to the source, hurting traffic and illegally benefitting from the work of its reporters.

While Penske Media is the biggest name to take on Google over its AI Overviews, it’s not the first. Online education company Chegg sued Google in February, as did a group of independent publishers in Europe. The News / Media Alliance has also spoken out about the feature, calling it the “definition of theft” and seeking action from the DOJ.

Google spokesperson José Castañeda defended the summaries to the Wall Street Journal saying, “with AI Overviews, people find search more helpful and use it more.” But Penske and other publishers say there is little reason to follow the links provided in search results and, as a result, they have seen significant drops in traffic and revenue. Penske claims in the suit that revenue from affiliate links is down by over 1/3 this year, and it attributes that directly to a drop in traffic from Google.

The company also claims it’s in a tough situation. It can either block Google from indexing its content, essentially removing itself from all search results, which would further devastate its business. Or, it can continue to provide training material to Google for its AI, “adding fuel to a fire that threatens PMC’s [Penske Media Corporation] entire publishing business,” the complaint states, according to the Wall Street Journal.

Sainsbury’s hopes of offloading its retail business Argos to one of China’s biggest retailers have collapsed as talks ended on Sunday.

The supermarket giant confirmed it was no longer in discussions with JD.com to sell Argos, the general merchandise arm it bought for more than £1bn less than a decade ago.

On Saturday it had announced talks with JD.com for a sale that it said would speed up the transformation of Argos, whose business has gone increasingly online and within larger Sainsbury’s branches.

But 24 hours later, Sainsbury’s said the deal was off. It said: “JD.com has communicated that it would now only be prepared to engage on a materially revised set of terms and commitments which are not in the best interests of Sainsbury’s shareholders, colleagues and broader stakeholders. Accordingly, Sainsbury’s confirms that it has now terminated discussions with JD.com.”

JD.com, which is unrelated to JD Sports, is one of China’s biggest retailers and also provides its supply chain-based technology and services across other sectors. Last year, JD.com walked away from a deal to buy the UK white goods and electronics retailer Curry’s.

Argos is the UK’s second largest general merchandise retailer, behind Tesco, with the third most visited retail website in the UK, according to Sainsbury’s. It retains almost 200 standalone stores – with kiosks where customers used to peruse its famous catalogue – and more than 1,100 collection points, mostly in Sainsbury’s stores.

Before the collapse, Sainsbury’s had talked up the potential deal as accelerating its turnaround of Argos, saying: “JD.com would bring world-class retail, technology and logistics expertise and invest to drive Argos’s growth and further transform the customer experience.”

A sale would almost certainly have commanded a far lower figure than the £1.1bn Sainsbury’s paid in 2016 for Home Retail, the then owner of Argos. Sainsbury’s latest accounts valued the chain at £344m, and the group said growth at the main supermarket business was weighed down by falling Argos profits.

Some retail analysts have questioned the supermarket’s transplanting of the Argos operation into its stores. Hundreds of standalone Argos stores were closed as the business restructured and moved more to online shopping.

In 2023, Sainsbury’s closed down two Argos distribution centres and the business’s head office in Milton Keynes in a further attempt to cut costs.