We recently published a list of 7 Best Software Infrastructure Stocks To Invest In Now. In this article, we are going to take a look at where Oracle Corporation (NYSE:ORCL) stands against the other best software infrastructure stocks to invest in now.
Technology drives nearly every facet of modern businesses, from individual tasks to overall operations, goods, and services. When integrated effectively, it enhances communication, boosts efficiency, and increases productivity. Both tech and non-tech companies rely on software infrastructure and solutions to keep their operations running smoothly. To that end, these companies invest heavily in servers, cloud migration, network monitoring and management, and communication tools—all crucial components of software infrastructure.
One of the largest segments of the software infrastructure market is the cloud infrastructure industry. As businesses increasingly adopt cloud solutions to reduce costs and enhance efficiency, the demand for these services continues to grow. According to Synergy Research Group, global enterprise spending on cloud infrastructure services reached $79 billion in the second quarter, marking a $14.1 billion or 22% increase from the same period in 2023. This represents the third consecutive quarter of substantial growth, with year-over-year increases exceeding 20%.
Specifically, Software-as-a-Service (SaaS) emerged as a rapidly growing segment within the cloud infrastructure industry. Leading companies like Salesforce offer powerful functionalities through subscription-based models delivered over the web. This approach provides lower upfront costs, easy deployment, and ongoing updates, making advanced tools accessible to businesses of all sizes. In the SaaS model, providers grant customers access to application software and databases via the cloud. In 2023, the global SaaS market generated around $197 billion in revenue, representing nearly two-thirds of the total public cloud services market. Although SaaS revenue is projected to keep growing, its share of the overall cloud services market may decrease as cloud platform and infrastructure services expand.
Meanwhile, IT leaders are turning to tech consolidation in response to global economic challenges like inflation, recession, and supply chain disruptions, as well as the need to reduce costs while modernizing IT infrastructure. Gartner predicted that global IT spending would reach around $5.26 trillion in 2024, an increase of 7.5% from 2023. However, rapid expansion in technology investments can lead to tech sprawl, with new tools often lacking compatibility. According to a report from Zylo, organizations have wasted an average of $18 million this year alone due to inefficient SaaS management.
On another front, cybersecurity emerged as a critical component of software infrastructure, with spending surging since the onset of the COVID-19 pandemic. As cloud computing and remote work have become integral to business operations, organizations have encountered new security challenges. According to the Identity Theft Resource Center, the number of data breaches reached an all-time high in 2023, increasing by 71% from the previous record set in 2021 and up 78% from a slight dip in 2022. Given these trends, it’s no surprise that global cybersecurity spending was expected to surpass $200 billion in 2023—an increase of approximately 12% from 2022.
Our Methodology
In this article, we used a stock screener to identify tech companies that provide various forms of software infrastructure and/or are actively engaged in the industry. From that list, we selected the top 7 companies with the highest number of hedge fund investors, according to Insider Monkey’s database of 912 hedge funds as of the end of Q2 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Oracle Corporation (NYSE:ORCL)
Number of Hedge Fund Holders: 93
Oracle Corporation (NYSE:ORCL) is a comprehensive provider of software infrastructure solutions, offering a wide range of services through its Oracle Cloud Infrastructure (OCI). The OCI delivers a full suite of cloud deployment services, including servers, storage, networking, applications, and more.
Oracle Corporation (NYSE:ORCL) has set an ambitious revenue target, aiming to surpass $66 billion in fiscal year 2026, reflecting a growth rate of over 12%. Looking further ahead, the company projects revenues to reach approximately $104 billion by fiscal year 2029, indicating a compound annual growth rate (CAGR) of around 16%, with earnings per share expected to grow at about 20% annually by FY29.
The company’s hyper-scale cloud business has been a key growth driver, as demonstrated by a 52% increase in its Remaining Performance Obligations (RPO). Oracle’s late entry into the cloud infrastructure market has been offset by the development of its second-generation cloud, enabling the company to deliver high-performance, scalable, and efficient cloud solutions.
On September 16, HSBC raised its price target for Oracle Corporation (NYSE:ORCL) from $180 to $210, maintaining a Buy rating. The upgrade is based on Oracle’s strong growth outlook, with revenues expected to surpass $66 billion in FY26 and $104 billion by FY29, up from $52.9 billion reported for FY24.
As of the second quarter of 2024, 93 hedge funds held positions in Oracle Corporation (NYSE:ORCL), with a total stake value of $5.4 billion. Fisher Asset Management, led by Ken Fisher, was the largest shareholder, owning 17.58 million shares worth $2.48 billion as of June 30.
Overall ORCL ranks 3rd on our list of best software infrastructure stocks to invest in now. While we acknowledge the potential of ORCL as an investment, we believe that certain AI stocks hold promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ORCL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
