Palantir Stock Investors Just Got Fantastic News from Oracle CEO Safra Catz
News Summary
Despite Oracle's fiscal 2026 first-quarter results (ended Aug. 31) slightly missing analysts' revenue and EPS estimates, the company reported a staggering 359% surge in its remaining performance obligation (RPO) to a record $455 billion, expected to exceed half a trillion dollars. This growth is largely driven by robust AI demand, including four multi-billion-dollar contracts with three different customers. Oracle also issued an ambitious cloud revenue forecast, projecting $144 billion by fiscal 2029, indicating that its long-considered 'also-ran' Oracle Cloud Infrastructure (OCI) is poised to become a major player in the cloud market. Most of this projected revenue is already baked into the RPO, with future deals set to further increase its outlook. This news has significant implications for Palantir Technologies (PLTR) due to their wide-ranging partnership forged last year, which involves Palantir moving Foundry workloads to Oracle Cloud and deploying Gotham and Artificial Intelligence Platform (AIP) across Oracle's distributed cloud for the first time. As Oracle plans to expand its cloud footprint by more than sevenfold over the next five years, this provides a growing pool of potential customers for Palantir, especially since AIP has been Palantir's primary growth driver. While Palantir's valuation remains high, its recent stock decline offers a more reasonable entry point for investors.
Background
Palantir Technologies initially developed artificial intelligence (AI) solutions for the U.S. intelligence industry before branching out into the enterprise market. The advent of generative AI presented a compelling opportunity, fueling accelerating revenue and profit growth, with its Artificial Intelligence Platform (AIP) becoming a primary growth driver. In recent months, some investors have begun to wonder if the implementation of AI is running out of steam, with talk of an AI bubble emerging. Concurrently, Oracle has long been considered an 'also-ran' in the cloud infrastructure market, trailing significantly behind Amazon Web Services (AWS), Microsoft Azure, and Google Cloud. In 2024, Palantir and Oracle forged a strategic partnership where Palantir would move its Foundry workloads to Oracle Cloud and make Gotham and AIP deployable across Oracle's distributed cloud, aiming to expand AIP's availability to a wider cross-section of enterprise users.
In-Depth AI Insights
What does Oracle's explosive RPO growth signify for the broader AI market and cloud competitive landscape? - Oracle's massive RPO of $455 billion, projected to exceed $500 billion, serves as powerful validation of the genuine and sustained demand for enterprise-grade AI, dispelling some of the "AI bubble" rhetoric. - It indicates a deep, long-term commitment from large enterprises towards AI-driven transformation, with this demand translating into tangible, multi-billion-dollar contracts. - For the cloud infrastructure market, OCI's robust growth and aggressive forecasts signal the emergence of a disruptive player that could significantly erode the market share of established giants like AWS, Azure, and Google Cloud. This isn't just market expansion; it's a potential re-allocation of market share. How does the strategic symbiosis of the Oracle-Palantir partnership leverage their strengths to counter market leaders? - Palantir gains access to Oracle's vast and expanding global enterprise client base by deploying its Foundry and AIP on OCI, directly tapping into new customers as Oracle Cloud Infrastructure accelerates its expansion driven by AI demand. - For Oracle, integrating Palantir's cutting-edge AI platforms (AIP) significantly enhances OCI's AI capabilities and appeal, allowing it to offer more comprehensive and advanced AI solutions to clients, thereby creating a differentiated offering against AWS and Azure. - This symbiotic relationship enables both companies to bundle their offerings and present a more competitive, integrated AI/cloud solution, jointly challenging the dominant players in their respective sectors. How should investors evaluate Palantir's 196x forward earnings valuation in light of this positive Oracle news? - The sheer scale of Oracle's RPO and its AI emphasis indeed provides strong fundamental backing for Palantir's future growth, suggesting that long-term AI demand is not speculative but evidenced by substantial contracts. - However, a 196x forward P/E ratio still reflects extremely high growth expectations. Investors must carefully consider whether this valuation fully discounts all potential growth, and if Palantir can consistently convert the potential customers from Oracle into actual revenue at a rate exceeding market expectations. - While the recent stock pullback offers a "more reasonable" entry point, Palantir remains a high-risk, high-reward investment given its elevated valuation. Investors should focus on its AI product (AIP) client conversion rates, average revenue per customer growth, and whether the specific synergies with Oracle translate effectively into improved profit margins.