ZACKS·2026-01-28 09:00Core Viewpoint - Oracle's increasing cloud capital expenditure is positioning the company for its next growth phase, with a forecasted capital expenditure of around $50 billion for fiscal 2026, reflecting strong demand in AI and enterprise cloud services [2][3]. Group 1: Oracle's Growth Strategy - Oracle invested approximately $12 billion in the second quarter of fiscal 2026, focusing on GPU-based infrastructure and data centers to support Oracle Cloud Infrastructure growth [3]. - The company expects about $4 billion in incremental revenue acceleration starting in fiscal 2027, driven by AI training, inference, and multicloud deployments [4]. - Oracle is adopting a disciplined funding approach through a mix of debt markets and alternative models, such as customer-provided or leased chips, to align revenues with costs [5]. Group 2: Competitive Landscape - Oracle faces competition from Amazon and Alphabet, both of which are heavily investing in data centers and AI infrastructure to enhance their cloud services [6]. - Amazon's capital expenditure in the third quarter of 2025 reached nearly $90 billion, primarily for AWS and AI capacity, reinforcing its cloud leadership [7]. - Alphabet invested about $24 billion in the same period, focusing on servers and data centers to support Google Cloud and AI demand, with a significant backlog of $155 billion [8]. Group 3: Oracle's Stock Performance and Valuation - Oracle's shares have declined by 26.3% over the past six months, underperforming the Zacks Computer and Technology sector's growth of 14.4% [9][10]. - The current forward 12-month Price/Earnings ratio for Oracle is 23.1x, lower than the industry average of 26.69x, indicating a relatively undervalued position [10]. - The Zacks Consensus Estimate for Oracle's fiscal 2026 earnings is $7.42 per share, suggesting a growth of 23.05% compared to fiscal 2025 [11].