Oracle Agrees That AI Is Challenging the SaaS Model. Here's Why Oracle Thinks It's the Disruptor, Not the Disrupted.

By Daniel Foelber – Mar 18, 2026 at 5:05PM ESTKey PointsOracle is increasingly well positioned to benefit from AI through its infrastructure software segment and by embedding AI into its applications.Oracle’s leverage adds risk to the investment thesis. Software-as-a-service (SaaS) companies are being challenged by artificial intelligence (AI) models that can perform tasks previously dependent on enterprise software. And as AI-powered tools enable users to do more with less, enterprise clients may need fewer subscriptions, potentially slowing user growth for SaaS giants. The sell-off in software companies has intensified in 2026, with many high-profile names from Salesforce to ServiceNow hitting multi-year lows. Application software is a key part of Oracle's (ORCL 1.18%) business. But the company is now a major player in infrastructure software as well, with Oracle Cloud Infrastructure (OCI) on track to make up the vast majority of Oracle's revenue over the next few years. Here's why Oracle believes it can thrive in the AI age, and whether the growth stock is a buy now. Image source: Getty Images. Oracle's bold bet comes at a high price Oracle has transitioned from a software licensing business to a high-margin, subscription-based database and database management software company, to now a major player in cloud computing, with OCI building new, fast, and ultra-efficient data centers specifically engineered for high-performance computing and AI applications. The numbers speak for themselves. In Oracle's latest quarter (third-quarter fiscal 2026), cloud infrastructure-as-a-service and SaaS revenue was $8.9 billion -- up 44% year over year. Cloud computing now makes up a little over half of Oracle's total revenue. And Oracle is forecasting total revenue to jump to $90 billion in fiscal 2027, up from an expected $67 billion in fiscal 2026. ORCL Net Total Long Term Debt (Quarterly) data by YCharts Oracle's data center spending is reflected in its soaring capital expenditures (capex). But operating cash flow isn't growing nearly as quickly. As a result, Oracle's debt has exploded higher, especially in the last year, while free cash flow (FCF) has fallen off a cliff. ExpandNYSE: ORCLOracleToday's Change(-1.18%) $-1.83Current Price$152.86Key Data PointsMarket Cap$445BDay's Range$152.08 - $154.9552wk Range$118.86 - $345.72Volume487KAvg Vol28MGross Margin64.30%Dividend Yield1.29% Oracle is so much more than just a software company Oracle embeds AI agents into Oracle cloud applications, including enterprise resource management agents for payments and planning, human capital management agents for recruiting and career development, supply chain management agents for inventory and cost management, and more. Oracle co-CEO Mike Sicilia said the following on the March 10 third-quarter fiscal 2026 earnings call: So, yes, we think AI is disruptive -- we do -- but we think we are the disruptor because we are actually embedding the AI right into our applications, full stop, again at no additional cost. These are features that come in the application suite as part of quarterly upgrades, as part of a regular cadence. So I am actually -- rather than thinking that AI spells the death of SaaS, at least for Oracle Corporation -- I think it actually helps our SaaS position and helps us get to market even more quickly. Oracle has an impeccable business model. Its combination of building cloud infrastructure on OCI and a highly differentiated SaaS model makes it well positioned to benefit from AI. The risk to the investment thesis isn't AI, but rather whether Oracle's spending has gone too far and if it can return to positive FCF quickly enough to restore order to its balance sheet. Investors who are comfortable with these risks may want to buy the stock, whereas others may want to wait for the game plan to play out.Read NextMar 18, 2026 •By Adria CiminoDown 20%, Is Oracle a No-Brainer AI Buy?Mar 18, 2026 •By Daniel FoelberOracle Isn't Done Spending Big on AI. Here's Why It Said Investors Shouldn't Worry.Mar 18, 2026 •By Daniel FoelberOracle's "Halo Effect" Is the Real Deal. But is the AI Growth Stock a Buy in March?Mar 18, 2026 •By Danny Vena, CPAOracle's Backlog: Potential Windfall or Ticking Time Bomb?Mar 17, 2026 •By Adria CiminoThis $50 Billion AI Bet Is Either Oracle's Masterstroke or Its Biggest MistakeMar 17, 2026 •By John Ballard2 Unstoppable Tech Stocks to Buy Right Now for Less Than $1,000About the AuthorDaniel Foelber is a contributing Motley Fool stock market analyst with extensive experience covering the broader stock market and publicly traded companies across energy, industrials, utilities, materials, technology, communications, consumer discretionary, consumer staples, and financial stocks. Daniel looks for industry leaders offering compelling growth, value, or dividends to generate passive income. He has also written for energy trade publications and helped build oil and gas training modules. He holds a bachelor’s degree in finance and a certificate in personal financial planning from the University of Houston. He believes the best investors are those who focus on fundamentals, remain steady through volatility, and filter out market noise.TMFpalomino2Stocks MentionedOracleNYSE: ORCL$152.86(-1.18%)-$1.83SalesforceNYSE: CRM$194.47(-0.43%)-$0.84ServiceNowNYSE: NOW$113.80(-2.51%)-$2.93*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.