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Oracle (NYSE: ORCL) has been a solid performer on the stock market so far this year with impressive gains of 80% as of this writing. But its impressive rally has come to a halt following the release of the company's fiscal 2025 second-quarter results (for the three months ended Nov. 30) on Dec. 9 as its numbers fell shy of Wall Street's expectations.

Shares of the company that has witnessed a nice acceleration in its business thanks to the booming demand for its cloud infrastructure to serve artificial intelligence (AI) workloads were down more than 8% in pre-market trading on the day following its earnings release. However, a closer look at Oracle's performance last quarter and the healthy growth that the company recorded in a key metric suggest that investors may be missing the bigger picture.

Let's take a closer look at Oracle's numbers in this article and check why buying this stock right now could turn out to be a smart move for 2025, as well as the long run.

Oracle's revenue pipeline increased rapidly thanks to strong spending on cloud AI services

Oracle's revenue in fiscal Q2 increased 9% year over year to $14.1 billion, while its non-GAAP earnings jumped by 10% to $1.47 per share. Analysts, however, were looking for $14.11 billion in revenue along with earnings of $1.48 per share. It is worth noting that Oracle's top line came in at the higher end of management's guidance range as the company was expecting revenue to increase between 7% and 9% for fiscal Q2. Its bottom line is also at the midpoint of the guidance issued in September.

However, the robust demand for Oracle's cloud infrastructure, which is being rented by companies to train and deploy AI models, is probably the reason why Wall Street was expecting slightly faster growth from the company. But then, investors should not forget that Oracle's revenue pipeline improved at an incredible pace once again last quarter.

The company's remaining performance obligations (RPO), which is the total value of a company's contracts that are yet to be fulfilled, increased by an impressive 50% year over year in fiscal Q2 to $97 billion. The healthy growth in this metric is a clear indication that demand for Oracle's cloud infrastructure remains strong as more customers are signing up to rent its infrastructure-as-a-service (IaaS) offering to fulfill their AI needs.

Oracle management said during the company's latest earnings conference call that it witnessed "record" AI demand that led to a 52% year-over-year increase in its cloud infrastructure revenue last quarter to $2.4 billion. It is also worth noting that Oracle could have generated higher revenue from its cloud infrastructure business, but the demand in this segment was higher than supply.

After all, the consumption of Oracle's cloud infrastructure powered by graphics processing units (GPUs) from the likes of Nvidia increased by a massive 336% last quarter. Not surprisingly, Oracle is focused on expanding its cloud infrastructure, with 35 planned cloud regions for Microsoft Azure, Google Cloud, and Amazon Web Services in the works.

This expansion should help the company sustain its outstanding run in 2025. That's because spending on cloud infrastructure services is expected to increase at a faster pace in 2025 thanks to generative AI, according to Gartner. The research company is expecting a 25% jump in cloud infrastructure spending in 2025 to $212 billion, up from this year's growth of 21%.

The important thing worth noting here is that Oracle is growing at a faster pace than the cloud IaaS market, indicating that it is gaining share in this space. So, there is a solid chance that Oracle's remaining performance obligations and cloud infrastructure revenue will continue to improve at a remarkable pace in the new year. And it could continue gaining ground in this market, which could help the company deliver faster growth.

Investors shouldn't miss the bigger picture

Analysts are expecting Oracle's earnings in fiscal 2025 to increase 13% to $6.28 per share, followed by an identical increase in fiscal 2026 to $7.12 per share. However, it won't be surprising to see Oracle clocking stronger growth thanks to its rapidly increasing RPO. This could help accelerate its revenue growth, as well as the expansion of its cloud regions to serve the improving demand for AI-focused cloud infrastructure.

Moreover, Oracle seems built for healthy growth in the long run since the cloud IaaS market is forecast to generate $580 billion in revenue in 2030, according to Goldman Sachs. That would be more than double the revenue the market is expected to generate next year. So, savvy investors would do well to capitalize on Oracle's post-earnings pullback as it will now be available at a relatively cheaper valuation.

The stock is trading at 30 times forward earnings as of this writing, a discount to the tech-heavy Nasdaq-100 index's earnings multiple of almost 34. The drop in Oracle's stock price following its latest results means that investors will be able to buy it at a more attractive valuation. Investors should consider grabbing this opportunity because of the bright prospects of the cloud infrastructure market for 2025 and the long run.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Goldman Sachs Group, Microsoft, Nvidia, and Oracle. The Motley Fool recommends Gartner and 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.

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