For years, Oracle (ORCL) and IBM (IBM) were viewed as mature tech companies whose best days were behind them. Investors and analysts saw less scope for innovation or growth as these firms got overshadowed by younger cloud rivals. However, artificial intelligence (AI) gave these old tech giants a chance to reinvent themselves. While one is delivering explosive growth and signing massive customer contracts, the other is delivering far more modest gains.
The contrast reveals that only one legacy tech giant is truly winning the AI race. Let's take a closer look.
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The Case for Oracle
Sporting a market capitalization of $529 billion, Oracle is a legacy tech company that provides cloud computing infrastructure, databases, and enterprise software used by businesses to run their operations. Oracle’s transformation from a slow-moving enterprise software giant to one of the most surprising AI success stories has been nothing less than remarkable. Oracle's blowout fourth-quarter results, released on June 10, show why the legacy cloud giant’s growth story is restarting.
The most eye-catching number in Oracle’s Q4 print was the enormous backlog of $638 billion. Oracle's remaining performance obligations (RPO) reflect long-term contractual commitments from customers. Management expects to realize 12% of this RPO over the next 12 months, with another 34% over the next two years.
www.barchart.com Oracle is aggressively expanding to meet that demand over the next couple of years. Capital expenditures stood at $48 billion in fiscal 2026. The company delivered more than 1.2 gigawatts of capacity during fiscal 2026 and expects Q1 2027 deliveries to approach 1 gigawatt. For fiscal 2027, the firm also expects capex of roughly $70 billion. To help fund these investments, Oracle plans to raise around $40 billion through debt and equity during fiscal 2027, including its previously announced $20 billion at-the-market (ATM) equity issuance.
Revenue in Q4 increased 21% year-over-year (YOY) to $19.2 billion, while cloud infrastructure revenue soared 93%. Oracle’s multi-cloud revenue skyrocketed 404% and multi-cloud bookings surged 325%. The biggest growth driver behind these numbers is AI. Oracle signed an astonishing $67 billion in AI infrastructure contracts during the quarter, bringing its total value of prepaid and bring-your-own-hardware contracts to $75 billion. For full-year fiscal 2026, revenue crossed $67 billion for the first time, while adjusted earnings climbed 27% YOY to $7.63.
Oracle now offers more than 1,000 AI agents across its software portfolio, helping customers automate business processes directly within Fusion, healthcare, banking, and industry-specific applications. The company expects another powerful year in fiscal 2027, with a 28% increase in revenue and a roughly 20% increase in earnings. Cloud revenue could increase by around 60% on an average.
Oracle has revealed that the tech sector changes at a rapid pace and you survive if you adapt. The company’s transformation has impressed the Street, earning it a consensus “Strong Buy” rating. Of the 43 analysts covering the stock, 33 rate it a “Strong Buy,” one says it is a “Moderate Buy,” eight rate it a “Hold,” and one says it is a “Strong Sell.” ORCL stock is down 6% year-to-date (YTD), but its average target price of $256.07 implies potential upside of 41% from current levels. Meanwhile, the high price estimate of $400 suggests potential upside of 121% over the next year.
www.barchart.com The Case for IBM
With a market cap of $258 billion, IBM helps large organizations run, secure, and modernize their IT systems, with a growing focus on hybrid cloud and AI. IBM has been in business for more than a century now, surviving every major tech revolution. Today, the company is reinventing itself with the touch of AI. However, its strategy is slightly different, helping enterprises integrate AI into their existing operations, data environments, and mission-critical systems.
www.barchart.com In the first quarter of fiscal 2026, reported April 22, total revenue increased 9% YOY to $15.9 billion, while adjusted EPS increased 19% to $1.91 per share. Software remains IBM's strongest business with revenue up 8%, thanks to strong demand for AI-related solutions and continued expansion into higher-growth markets. Annual recurring revenue reached $24.6 billion, a 10% increase from the prior-year quarter. The company’s infrastructure revenue also saw double-digit growth.
Data segment revenue rose 16%, fueled by rising demand for generative AI products, strategic partnerships, and contributions from DataStax and Confluent. IBM believes the long-term value of AI will reside in enterprise workflows, where businesses actually operate, and not just on foundational models. That’s where the company is focusing. Generative AI now accounts for around 30% of its consulting backlog. Management anticipates that AI-driven consultancy projects will continue to drive revenue growth.
On Wall Street, IBM stock has an overall “Moderate Buy” rating. Of the 22 analysts covering the stock, 11 rate it a “Strong Buy,” two say it is a “Moderate Buy,” eight rate it a “Hold,” and one says it is a “Strong Sell.” While IBM stock is down 8% YTD, the average target price of $298.29 implies potential upside of 10% from current levels. The high price estimate of $365 suggests potential upside of 34% over the next year.
Only One Legacy Tech Giant Is Winning the AI Race
No doubt, both Oracle and IBM have reinvented themselves for the AI era. But Oracle is operating on an entirely different scale. Oracle’s growth numbers are in the triple digits. Plus, its massive $638 billion backlog and $67 billion worth of AI infrastructure contracts signed in a single quarter point to a growth trajectory that IBM cannot currently match.
Oracle stands out as the clear winner in this race.
www.barchart.com On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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