Oracle vs. Microsoft: One AI Hyperscaler Stock Is a Buy, the Other Is One to Watch, Says RBC

Oracle (NYSE:ORCL) and Microsoft (NASDAQ:MSFT) are both major players in the cloud computing market, with artificial intelligence now playing a central role in the growth story for both companies. Oracle has been gaining ground rapidly in cloud infrastructure, particularly as demand for AI computing power surges, while Microsoft’s Azure business continues to benefit from its huge enterprise customer base and deep investments in AI.

Back at the end of July, Microsoft delivered a strong set of quarterly results, highlighting continued momentum across Azure and its broader cloud business. Oracle has now followed with an impressive earnings report of its own, boosted by surging AI demand.

With both companies benefiting from the huge need for AI infrastructure and cloud services, the question for investors is which stock offers the more compelling opportunity right now.

RBC analyst Rishi Jaluria, who covers both names, sees plenty to like in Oracle’s latest results. Revenue rose 30% year-over-year, cloud revenue jumped 62%, and EPS came in ahead of expectations. The standout was Oracle Cloud Infrastructure (OCI), where revenue surged 121% to $7.4 billion, accelerating sharply from the previous quarter. Total remaining performance obligations reached $664 billion, up 47%, helped by another $30 billion in AI cloud contracts.

Jaluria believes OCI’s momentum should continue as Oracle brings additional capacity online faster than expected. The company is also seeing strong demand for its infrastructure, with renewed GPU contracts carrying a 20% premium to previous agreements.

The outlook is similarly strong, with Oracle forecasting 30% to 34% revenue growth for the current quarter and 65% to 71% cloud growth, at the midpoint ahead of analyst expectations.

Looking at the big picture, Jaluria likes Oracle’s leadership in database software, its broad product portfolio and its position in enterprise resource planning. However, he remains cautious about the company’s acquisition history and “integration challenges,” as well as the intensely competitive cloud market. Longer sales cycles and geopolitical uncertainty also present risks, particularly as Oracle expands internationally.

“We remain watchful as the company navigates leaner margins and capital-intensive infrastructure buildout,” Jaluria summed up.

As such, Jaluria has a Sector Perform rating on ORCL shares, backed by a $165 price target (lowered from $190, implying the stock will deliver returns of 7% over the one-year time frame. (To watch Jaluria’s track record, click here)

Turning to Microsoft, Jaluria sees continued strength in Azure, with management forecasting around 44% to 45% constant-currency growth. Microsoft has changed how it reports its cloud businesses, with Azure now reported separately and Microsoft 365 Cloud bringing together commercial and consumer cloud businesses, along with GitHub Cloud and other developer cloud services and Security Copilot. Jaluria notes that Microsoft’s overall revenue, operating margin and EPS guidance remained unchanged despite the new reporting structure.

However, M365 Commercial Cloud growth was actually raised to 17% from 15%, while commercial seat growth is now expected to reach 7%, up from 6% in fiscal 2026.

“Stepping back, we see these changes improving visibility into key growth drivers,” the analyst said.

Accordingly, Jaluria rates MSFT stock as Outperform (i.e., Buy), while his $640 price target offers 12-month upside of 29.5%.

Unlike the RBC stance, the Street sees both names as Strong Buys. ORCL stock is expected to appreciate by 65% in the year ahead, given the average target stands at $254.32. Meanwhile, MSFT’s average target comes in at $571.41, a figure offering 12-month upside of 15%. (See ORCL stock forecast or MSFT stock forecast)