According to Zhitong Finance APP, Oracle (ORCL.US) will have the opportunity this week to prove to investors that its stock price surge, which has increased its market value by approximately $370 billion this year, is based on solid fundamentals.
The software manufacturer will kick off a four-day &#34;AI World Conference&#34; in Las Vegas on Monday. The focus of the conference will be on Oracle's cloud computing business, which has rapidly expanded and driven its stock price up 76% this year, making it one of the best-performing components of the S&amp;P 500 index in 2025.
This conference comes at a time when the market is concerned that Oracle is sacrificing profits to rent computing power to AI companies like OpenAI.
Last week, media reports indicated that Oracle's cloud business profit margins were below most Wall Street expectations, causing its stock price to plummet 7.1% during trading on Tuesday. Although the stock quickly recovered, doubts about its business profitability persist. Oracle has predicted that revenue from this business will surge by 700% over the next three fiscal years.
Mark Matyiak, a senior partner and financial advisor at Prudential Consulting, stated, &#34;There are indeed investors concerned about profit margins or who believe its targets are too aggressive. This is a good opportunity for Oracle to alleviate concerns, especially since many skeptics believe its valuation is too high, particularly if its massive collaboration with OpenAI fails to generate sustained revenue.&#34; Prudential's parent company manages approximately $15 trillion in assets.
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Wall Street anticipates Oracle's AI World event
Tuesday's agenda will include a keynote speech by newly appointed co-CEO Mike Siciliano, and founder and CTO Larry Ellison will also make an appearance. Ellison's stake in Oracle briefly made him the world's richest person last month. Investor Day on Thursday is expected to unveil the latest financial targets.
Wall Street holds high expectations for this event. Mizuho Securities analyst Siti Panigrahi noted in a report that this conference will be &#34;an important catalyst, and the company is expected to clarify many controversies,&#34; particularly regarding profit margins. Bernstein analyst Mark Moedler anticipates that &#34;more details will help alleviate some concerns.&#34;
The skyrocketing demand for cloud computing has driven Oracle's overall sales growth, but the enormous costs associated with supporting this growth have eroded profits.
Data shows that Oracle's revenue growth for the current fiscal year is expected to jump from 8% last year to 17%, but the gross profit margin after operating expenses is expected to decline by more than 2 percentage points to 68.4%. In fiscal year 2021, its gross profit margin exceeded 80%.
The rapid growth has firmly positioned Oracle among the winners in AI. The company reached a reportedly $300 billion cloud computing agreement with OpenAI in September, and its earnings report on September 10, which exceeded expectations, triggered a 36% surge in its stock price in a single day.
However, the soaring stock price has also sparked bubble theories, as its valuation has reached the highest level since the internet bubble over twenty years ago
Data shows that based on expected profits for the next 12 months, Oracle's price-to-earnings ratio has approached 41 times, more than double its ten-year average, and far exceeds the price-to-earnings ratios of the other seven major tech giants, excluding Tesla.
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Free cash flow is expected to decline significantly this year.
In addition to profit margins, investors are also concerned about the expenditures required to expand Oracle's cloud computing capabilities. As of fiscal year 2026, ending in May this year, Oracle's capital expenditures are expected to reach $35.4 billion, a 67% increase from the previous year. Therefore, after experiencing a loss in free cash flow for the first time since 1990 last year, it is expected that there will be a negative cash flow of $9.8 billion this year.
Of course, AI bulls still have reasons to remain optimistic: Microsoft's cloud business struggles to meet strong demand, Dell Technologies has raised its revenue and profit growth guidance for the next four years due to AI expectations, and TSMC's sales performance in September was strong.
However, Gene Munster, managing partner at Deepwater Asset Management, pointed out that the interconnectedness of AI giants means that signs of weakness or excessive sentiment in any one company could drag down the entire sector.
&#34;If one falters, everyone suffers; the entire trading logic could collapse,&#34; Munster said. &#34;Oracle has just joined the AI narrative circle, but before the earnings season, this conference will reveal whether we are still at the beginning of the AI trading cycle or at the start of its end.&#34;

ORCL

Oracle will demonstrate to investors at this week's AI World Conference whether its stock price surge, which has increased its market value by $370 billion, has a solid foundation. The conference will focus on its cloud computing business, which has driven the stock price up by 76%. Despite market concerns about its profit margins, Oracle expects its revenue to soar by 700% over the next three years. Investors are looking forward to the speech of the new co-CEO and the announcement of the latest financial targets to dispel market doubts about its valuation

Is the 370 billion surge just a flash in the pan? The Oracle AI conference becomes a key verification moment