Oracle
ORCL- Our rating
- buyhigh conviction
- 12-month target
- $163.84 +37.4%
- Expected vs. S&P 500
- +20.6 ptsSee the math
- Next earnings
- Dec 14In 39 daysEarnings calls page ↗
Oracle's AI cloud is now its biggest business, and Oracle is borrowing and selling stock to pay for the data centers.
Oracle built its business on database software and support, and now also rents out AI computing power from its own data centers. That cloud business has become its largest, while the older software business is shrinking slightly. Building the data centers costs more than Oracle earns, so it has borrowed $43B since September 2025. It has also sold $25B of stock and preferred shares, and the stock depends on not needing much more.
Oracle's database software runs the records of large companies and governments, which pay for support every year. Oracle now spends that cash, plus borrowed money, building data centers to rent out for AI.2,11,19
What it sells
- Cloud infrastructure38% of revenue, Q1 FY2027
Rents computing power and AI chips from Oracle's data centers. It is the fastest-growing part of Oracle and the reason for its heavy spending.
- Database software and support29% of revenue, Q1 FY2027
Licenses for Oracle's database and other software, plus yearly support fees that nearly all customers renew. The steady source of cash.
- Cloud applications22% of revenue, Q1 FY2027
Business software rented by subscription: finance, HR and supply chain apps, NetSuite for smaller companies, and Oracle Health for hospitals.
- Consulting services7% of revenue, Q1 FY2027
Helps customers install and run Oracle software. It earns lower margins than the rest of the business.
- Hardware4% of revenue, Q1 FY2027
Exadata database servers and storage, installed in customers' own data centers.
Who buys it
Large companies, governments, schools and resellers, reached through Oracle's sales force and partners. Some cloud infrastructure contracts are concentrated among a few large customers, including OpenAI. The Americas were 71% of Q1 FY2027 revenue.
Where you've seen it
Oracle Health, formerly Cerner, makes the electronic medical records software some hospitals use for patient charts.
In September 2025, Oracle disclosed $455B of signed future contracts, mostly for AI computing, and its stock jumped by more than a third. The Wall Street Journal reported that a $300B OpenAI deal was among them, though Oracle never confirmed it. Building that capacity costs more than Oracle earns, and paying for it now falls to co-CEOs Clay Magouyrk and Mike Sicilia, who took over from Safra Catz.
How the business makes money
Why Oracle's old software pays for its AI landlord bet1,2,3,5,6,7,9,13,19,21
- Step 1
AI companies sign long contracts to rent computing from Oracle: $664B signed, but only about 13% turns into revenue within a year.
- Step 2
Oracle builds the data centers first, paid for with borrowing, stock sales and customer prepayments. Prepayments covered about 40% of last quarter's spending.
- Step 3
Capacity earns money only once it goes live. Oracle delivered 850 megawatts last quarter, nearly triple the quarter before.
- Step 4
Renting out chips earns less per dollar than software, so Oracle keeps less of each sale. Database support, $19.8B last year, supplies the steady cash.
- What shareholders get
That support cash pays the dividend and interest. Building costs more than Oracle earns, so the stock is betting it won't need much more borrowing or new shares.
Advantages
Customers help pay for the build
Strong advantageStrong, because funding is Oracle's main risk. In its largest AI contracts, customers have prepaid or supplied $75B of hardware, so Oracle borrows less per dollar of contract than a rival paying for everything.3,1
What's changing
A funding cap after a credit scare
In October, worry about AI borrowing and a report that OpenAI's revenue trailed earlier figures pushed Oracle's stock down about 12%. At its October 28 investor day, Oracle capped new fundraising through fiscal 2030 at $20B, half stock and half debt, and promised positive free cash flow in the second half of fiscal 2028. The stock rose 11%.30,31,32,33
Competitors
Who else an investor would consider, and how they compare.
| Company | Market value | What it does | Compared with Oracle |
|---|---|---|---|
| Oraclethis stock | $381.66B | Oracle's database software runs the records of large companies and governments, which pay for support every year. Oracle now spends that cash, plus borrowed money, building data centers to rent out for AI. | |
| MicrosoftMSFT | $3.96T | Rents Azure cloud computing and sells AI to businesses alongside Office. | Microsoft funds its AI build from its own cash; Oracle borrows and sells stock.26 |
| Amazon (AWS)AMZN | $2.69T | The largest cloud, renting computing and storage to businesses of every size. | AWS is about six times bigger; Oracle grows faster from a smaller base.24,1 |
| Alphabet (Google Cloud)GOOGL | $3.88T | Rents cloud computing built around its own Gemini AI models and TPU chips. | Google Cloud already makes big profits; Oracle's AI rentals have not proven theirs yet.25 |
| CoreWeaveCRWV | $30.43B | Rents only NVIDIA GPUs to AI companies, funded by heavy borrowing and still losing money. | Both borrow heavily for AI; only Oracle has software profits to cushion the debt.27 |
| SAPSAP | $295.59B | German business software that runs finance, supply chains and HR for big companies. | SAP's cloud apps grow about twice as fast; Oracle's bigger bet is renting AI computing.28,1 |
Leadership
Who runs the company, and how the stock has done under the CEO.
When Magouyrk was named (Sep 2025), the stock moved +6.3% that day; the S&P 500 moved +0.5%.
Wall Street on Magouyrk: MixedMorgan Stanley rates it a Hold but raised its price target on better margins from renting out AI chips. Jefferies rates it a Buy but cut its price target, citing Oracle's need to raise money for AI data centers.L2,L7
Leadership sources (7) · researched Oct 2026
- L1Oracle Corporation Announces Promotion of Clay Magouyrk and Mike Sicilia to CEOs; Safra Catz Appointed Executive Vice Chair of the Board of Directors · Oracle, 2025-09-22
- L2Oracle appoints insiders Clay Magouyrk, Mike Sicilia as co-CEOs in surprise move · Reuters via WHBL, 2025-09-22
- L3Oracle hires Schneider Electric's Maxson as CFO amid AI spending boom · Reuters via Yahoo Finance, 2026-04-06
- L4Oracle Board Appoints Larry Ellison Executive Chairman and CTO · Oracle, 2014-09-18
- L5Oracle Corp. Form DEF 14A (2026 proxy statement) · Oracle / SEC, 2026-09-25
- L6Oracle Corp (ORCL) (Q1 2027) Earnings Call Highlights: Record Revenue, 121% Cloud Growth · Yahoo Finance, 2026-09-11
- L7Morgan Stanley raises Oracle stock price target to $210 on margin outlook · Investing.com, 2026-09-04
Bull vs. bear: two bets on the same stock
- 1
A share is a small slice of the company. Its value comes from the profits the company will make in the future.
- 2
Nobody knows those profits yet. Buyers (bulls) pay today's price betting they'll beat what most people expect. Sellers (bears) bet they'll fall short.
- 3
When results come in, the price moves toward whichever side was right, and that side makes money.
Can Oracle keep this year's net data center spending within its $70B cap and reach positive free cash flow by fiscal 2029, as it now targets, without selling much more stock?1,2,3,10,13,17,18,21,30,32
If customers keep prepaying and new capacity comes online on time, infrastructure revenue compounds, spending peaks and cash flow turns positive without many new shares.
- Growth is still speeding up. Cloud infrastructure grew faster than the 93% of the quarter before, and Oracle expects total cloud revenue to grow at least 65% this quarter.
- Oracle has capped its fundraising. It says $20B more through fiscal 2030 will do, and targets at least $30B of free cash flow in fiscal 2029.
- Customers are paying up front. Their prepayments covered about 40% of last quarter's data center spending.
- What Oracle builds gets used, at rising prices. AI capacity is 97.9% used. Oracle re-rented expiring GPU capacity at about 20% higher prices.
If a big AI customer slows payments or data centers run late, Oracle, carrying about $125B of debt, must sell more shares and shrink each holder's stake.
- The cash burn is lasting years. Free cash flow was negative $23.7B last fiscal year. Analysts expect about negative $33B next year too.
- Lenders are getting nervous. In October, insuring Oracle's debt cost over 3% a year, and S&P rates it BBB-, one notch above junk.
- Each share owns less of Oracle. Shares outstanding rose 5% in one quarter after a stock sale, and preferred stock converts into more shares in 2029.
- Some projects are slipping. Oracle and OpenAI dropped a planned Abilene expansion in March, and Oracle sent a force majeure notice over delayed gas supply in New Mexico.
Where Delphi landsbuyWe think the bull case is more likely than today's price assumes.See why
What to watch
The numbers that will settle the debate.
- Expected earnings per share
- $1.83
- Expected revenue
- —
What to listen for: Whether net data center spending stays on pace for the $70B cap, and whether cash flow tracks Oracle's promise to turn positive in the second half of fiscal 2028.20,1,30
What would prove this wrong
- ✕A major AI customer delays, shrinks or cancels a large contract.
- ✕Net cash data center spending exceeds the $70B yearly cap.
- ✕Oracle raises more than its $20B cap on new funding through fiscal 2030.
- ✕New Mexico or other large sites miss their power and opening dates.
- ✕Cloud infrastructure growth slows sharply before free cash flow turns positive.
with medium conviction. The stock trades below its five-year norm of about 20 times expected earnings, while earnings per share should grow about 27%. Funding is the main risk.
- 12-month target
- $163.84 (+37.4%)
- Plus dividend
- +1.7%
- S&P 500, same method, with dividends
- +18.5%
- Expected vs the market
- +20.6 points
The math behind the recommendation
Three 12-month price scenarios, weighted by probability, compared with the S&P 500 under the same method.
Infrastructure revenue keeps doubling, customers keep prepaying and spending peaks this year, so fiscal 2028 earnings beat forecasts with little new stock needed.
$12.81 earnings per share × 16 = $204.48
Revenue reaches about $90B this year and $132B next and earnings match forecasts, with Oracle raising its remaining funding partly through new stock.
$11.59 earnings per share × 14.2 = $164.95
A large AI customer slows down or sites run late, pushing revenue later and forcing Oracle to sell more stock to cover negative cash flow.
$10.54 earnings per share × 10.7 = $113.09
Why these odds: Oracle beat estimates four straight quarters, and last month 35 of 36 fiscal 2027 revisions were up, though fiscal 2028 had 10 cuts. Later years' figures add 31M shares from the preferred conversion and 150M to fund cash burn plus dividends.
How the prices are built: Wall Street expects earnings per share of $11.59 for the year starting a year from now (analysts range from $9.49 to $14.02). Today the stock trades at 13.1 times next year's earnings per share; its five-year middle is 19.8. Because earnings per share is forecast to grow fast, valuations are cut 4%, since fast growth rarely keeps its price.1,2,10,11,20,21,22,23,30
What tests the call: Fiscal Q2 2027 earnings and data center spending update (Dec 9)
Buy means expected to beat the S&P 500 by 10+ points over 12 months; Sell means expected to trail it by 10+. Inputs gathered Oct 28; the recommendation updates with the price every day. Model-generated, not personalized investment advice. How ratings work · Track record
At $119.22, investors pay less for each dollar of Oracle's earnings than for the average stock's
Oracle trades at 13 times the earnings analysts expect over the next 12 months. That ratio is the multiple: what investors pay today for each dollar of a year's earnings. That is cheaper than it has been 80% of the time over the past five years, when the middle was 20.
Analysts expect earnings to grow about 28% the year after, against about 16% for the S&P 500. The S&P 500 trades at 19 times. At the market's multiple, today's price would only make sense if Oracle earned about 30% less than forecast over the next year.
- Oracle multiple
- 13×
- S&P 500 multiple
- 19×
- Base case
- +38%
- Bear case
- −5%
Price over the next 12 months' expected earnings.
The same measure for the market.
Our most likely 12-month outcome from $119.22.
Bull case +72%.
The skewOur bear case loses about 13¢ for every $1 our base case makes. That ratio, how much you stand to lose against how much you stand to make, is the skew.
Last earnings
FQ1 2027 results, reported Sep 10
Cloud infrastructure revenue more than doubled, the backlog rose to $664B, and Oracle raised its fiscal 2027 earnings forecast to $8.10 a share.1,2,12,14,15,16,20
| Reported Sep 10 | Expected | Actual | Difference |
|---|---|---|---|
| Earnings per share | $1.67 | $1.92 | +15.0% |
| Revenue | — | — | — |
Stock reaction: Up as much as 8.5% the next day; closed down 1.7%
Why the stock moved
- Up: earnings beat by about 10% and infrastructure revenue grew 121%.
- Down: a filing showed Larry Ellison could sell up to 50M shares; he canceled the plan a day later.
- Down: free cash flow was negative $5.4B and borrowings stayed near $125B.
- Down: Oracle added about $700M to its restructuring plan.
What it means for the stock: Strengthened demand and delivery; did not ease the funding question, since cash flow stays negative and about $20B more funding is still planned this year.
Limits of this analysis
Claims that rest on thin or conflicting sources, estimates that had to be extended, and judgment calls.
- ?The $300B OpenAI contract is a Wall Street Journal report from September 2025; Oracle has never confirmed it or said how much of its $664B backlog OpenAI accounts for.
- ?No acceptable source publishes fiscal 2029 adjusted earnings consensus. We grew fiscal 2028's $11.00 by its own 35% consensus growth, not MarketScreener's 47% unadjusted growth, and scaled fiscal 2028's range.
- ?Our 150M new shares assume Oracle funds cash burn and dividends with stock at $142.30. Its October plan calls for only $10B of new stock, so our per-share figures may be too cautious.
- ?Valuation history divides quarter-end prices by next fiscal year's expected earnings, not the next 12 months, and mostly reflects Oracle as a slower-growing software company, which a debt-funded cloud builder may not merit.
- ?Why the stock reversed after earnings (Ellison's sale plan, $700M of extra restructuring, debt) is press interpretation; no primary source explains the move.
Sources
Written Oct 28. Numbers link to these sources.
- 1Oracle Announces Q1 Results Driven by Triple Digit Growth in Cloud Infrastructure Revenues (Form 8-K, Exhibit 99.1) · Oracle / SEC, 2026-09-10
- 2Oracle Form 10-Q, quarter ended August 31, 2026 · Oracle / SEC, 2026-09
- 3Oracle Announces Record Q4 and FY 2026 Results (Form 8-K, Exhibit 99.1) · Oracle / SEC, 2026-06-10
- 4Oracle Announces Fiscal Year 2026 Third Quarter Financial Results (Form 8-K, Exhibit 99.1) · Oracle / SEC, 2026-03-10
- 5Oracle Announces Fiscal Year 2026 First Quarter Financial Results (Form 8-K, Exhibit 99.1) · Oracle / SEC, 2025-09-09
- 6Oracle stock gains 36% to post best day since 1992, adding $244 billion in value · CNBC, 2025-09-10
- 7Oracle Corporation Announces Promotion of Clay Magouyrk and Mike Sicilia to CEOs (Form 8-K, Exhibit 99.1) · Oracle / SEC, 2025-09-22
- 8Oracle Form 8-K: appointment of Hilary Maxson as Chief Financial Officer · Oracle / SEC, 2026-04-06
- 9Oracle announces calendar year 2026 funding plan (free writing prospectus) · Oracle / SEC, 2026-02-01
- 10Prospectus supplement: 6.50% Series D Mandatory Convertible Preferred Stock · Oracle / SEC, 2026-02-04
- 11Oracle Form 10-K, fiscal 2026 · Oracle / SEC, 2026-06-22
- 12Oracle's stock edges up on earnings beat as cloud infrastructure revenue more than doubles · CNBC, 2026-09-10
- 13Oracle Q1 FY2027 slides: cloud infrastructure surges 121%, guides $90B+ · Investing.com, 2026-09-10
- 14Oracle Stock Sank After Earnings -- Is It a Buy? · The Motley Fool, 2026-09-15
- 15Larry Ellison adopts plan to sell up to 50 million Oracle shares · CNBC, 2026-09-11
- 16Larry Ellison nixes plan to offload up to $7.5 billion worth of Oracle stock · CNBC, 2026-09-12
- 17Oracle and OpenAI End Plans to Expand Flagship Data Center (Bloomberg) · Insurance Journal, 2026-03-10
- 18Oracle sends force majeure notice on its New Mexico Stargate data center · TechCrunch, 2026-09-24
- 19OpenAI, Oracle Sign $300 Billion Computing Deal, WSJ Reports · Reuters via U.S. News, 2025-09-10
- 20Oracle Corporation (ORCL) Analyst Ratings, Estimates & Forecasts · Yahoo Finance, 2026-10-05
- 21Oracle Corporation: Financial Data Forecasts Estimates and Expectations · MarketScreener, 2026-10-05
- 22Oracle (ORCL) Financial Ratios, quarterly · StockAnalysis, 2026-10-05
- 23Oracle (ORCL) Stock Forecast · StockAnalysis, 2026-10-05
- 24Q2 earnings: CEO Andy Jassy on why AWS is booming · Amazon, 2026-07-30
- 25Alphabet Q2 2026 earnings: revenue up 24%, Cloud surges 82% · Yahoo Finance, 2026-07
- 26Microsoft Shares Jump as Azure Posts Fastest Cloud Growth Since 2022 · Bloomberg, 2026-07-29
- 27CoreWeave Reports Strong Second Quarter 2026 Results · CoreWeave Investor Relations, 2026-08-11
- 28SAP Quarterly Statement Q2 2026 · SAP via Nasdaq, 2026-07-23
- 29Oracle to raise up to $50bn in debt and equity in 2026 · DatacenterDynamics, 2026-02
- 30Oracle Investor Day 2026: Accelerating Value Creation (Form 8-K, Exhibit 99.1) · Oracle / SEC, 2026-10-28
- 31Oracle stock pops 11% as long-term revenue forecast and clarity on financing ease debt concerns · CNBC, 2026-10-28
- 32Credit stress is threatening to unwind the AI bull. All eyes are on Oracle to hold the line · CNBC, 2026-10-19
- 33Nvidia, Oracle, CoreWeave and other AI stocks sink on OpenAI revenue report · CNBC, 2026-10-08