The revenue that Oracle generates from leasing its data centers is reported in the OCI segment. That part of its business generated record revenue of $2.2 billion in the first quarter of fiscal 2025, up 45% from the same period last year.

This growth rate has accelerated from the previous quarter, and the company has often said that OCI revenue could grow at least 50% on a consistent basis.

As I mentioned earlier, Oracle can’t keep up with demand for its data centers. They’re building new ones as fast as they can, but lack of supply is the main reason why OCI sales haven’t increased by 50% or more in recent quarters.

This is reflected in the company’s remaining performance obligations (RPOs), which are something like a backlog. RPOs reached a record $99 billion in the first quarter, a whopping 53% increase over the same period last year. Oracle said it signed 42 new contracts for GPU computing capacity worth $3 billion in the first quarter alone.

OCI revenue (and its growth rate) is the key number investors should keep an eye on when Oracle reports its latest results this month.

Oracle shares are up 72% so far in 2024 and are trading near a record high. Based on trailing 12-month earnings per share of $3.88 and the share price of $181.41 as of this writing, the company trades at a price-to-earnings (P/E) ratio of approximately 47.

That’s a 48% premium over that Nasdaq-100 Index trading at a P/E ratio of around 32, meaning Oracle stock is quite expensive compared to its big tech rivals.

Therefore, investors with a time horizon of one year or less should probably avoid buying this stock. However, for investors willing to hold the stock for the next five years or longer, the picture is slightly different.

The automated nature of Oracle’s data centers should increase the company’s gross margin at scale. So, as mentioned, if the company expands its data center space by 10x, its profit growth could accelerate in the next few years.

That alone could lead to excellent long-term returns for investors, even if they pay a premium for the stock today. However, this scenario depends on continued strength in the OCI segment. Therefore, it is important to monitor Oracle’s results not just in December, but in each coming quarter.

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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Oracle. The Motley Fool has a disclosure policy.

Every Oracle stock investor should keep an eye on this important number in December. It was originally published by The Motley Fool