Both NVIDIA Corporation NVDA and Oracle Corporation ORCL have benefited from the artificial intelligence (AI) boom, with strong demand for AI infrastructure and cloud driving their latest earnings results. But which AI stock looks like a better buy now? Let’s explore –
NVIDIA’s Strong Earnings Cement Its AI Leadership
NVIDIA’s revenues reached $96.2 billion in the fiscal second quarter of 2027, representing a 106% year-over-year increase and an 18% rise sequentially, according to the company’s Aug. 26 press release. The Data Center segment remained NVIDIA’s primary growth driver. Data Center revenues came in at $89 billion, up 117% year over year and 18% from the previous quarter.
NVIDIA also maintained strong profitability alongside rapid revenue growth. During the quarter, the company’s GAAP and non-GAAP gross margins both stood at 75%, up from 72.5% a year ago. The company continues to convert strong revenue growth into even stronger earnings growth, helped by ongoing gains in operating income.
Looking ahead, NVIDIA expects revenues to reach approximately $108 billion, plus or minus 2%, in the fiscal third quarter of 2027, representing 12% sequential growth from the midpoint. With NVIDIA’s growth momentum remaining strong, and the advanced Vera Rubin platform already in full production, the company is well-positioned to capitalize on the next wave of AI infrastructure spending.
Oracle Delivers Exceptional Growth on Cloud and AI Demand
Given its size, Oracle’s revenue growth has been impressive, reaching $19.3 billion in the fiscal first quarter of 2027, up 30% year over year, driven by ongoing customer migration to cloud-based solutions, according to the company’s Sept. 10 press release.
Oracle’s Cloud Infrastructure (IaaS) revenues reached $7.4 billion, up 121% year over year, while Cloud Applications revenues rose 10% to $4.2 billion. The expanding IaaS business positions Oracle to benefit from the increasing demand for AI infrastructure, while the company gets a stable recurring-revenue base through SaaS.
Oracle further expects revenues to grow 30-34% in the fiscal second quarter of 2027 and reach at least $90 billion for the full year. Additionally, the company’s $664 billion in remaining performance obligations, up $209 billion from the previous year, provides strong visibility into future growth. At the same time, Oracle’s rapid growth is accompanied by an increase in profitability. The company’s non-GAAP operating income rose 31% to $8.2 billion in the fiscal first quarter.
NVIDIA vs. Oracle: One AI Stock Looks Like a Better Buy Now
Explosive Data Center growth, strong margins, and a robust outlook reinforce NVIDIA’s position as a top beneficiary of the continuing AI infrastructure boom. Similarly, strong cloud and AI demand is driving Oracle’s growth, while its growing backlog and improving profitability support a positive outlook.
However, Oracle’s heavy capital spending to expand its Cloud Infrastructure business led to negative free cash flow of $5 billion in the first fiscal quarter and increased financial pressure on the company. Anyhow, Oracle’s debt-to-equity ratio of 175.2% is significantly higher than NVIDIA’s 14.1%, suggesting greater financial leverage and possibly greater downside risk during economic downturns.
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Moreover, NVIDIA appears more efficient at generating profits from shareholders’ equity than Oracle. This is because NVIDIA’s return on equity (ROE) of 97.5% exceeds Oracle’s ROE of 70.2%.
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Therefore, NVIDIA appears to be the better buy following earnings than Oracle, with lower financial leverage and higher profitability supporting a more favorable outlook. NVIDIA currently has a Zacks Rank #1 (Strong Buy), while Oracle has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks Rank #1 stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
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