Oracle Corporation Research Summary Company Overview - **Company**: Oracle Corporation (ORCL.N) - **Industry**: Software - **Market Cap**: $522.3 billion - **Current Share Price**: $178.18 (as of January 22, 2026) - **Price Target**: Revised from $320.00 to $213.00 [1][2][9] Key Insights Financial Performance and Projections - **Backlog Growth**: Oracle's backlog of contracted customer commitments increased by $426 billion, reaching $523 billion, primarily driven by AI compute infrastructure contracts, notably with OpenAI, which accounts for approximately $300 billion (60% of the backlog) [12][14]. - **EPS Estimates**: Revised FY28 and FY30 base case EPS estimates are $8.51 and $10.02, significantly below Oracle's targets of $10.65 and $21.00, due to cautious views on GPU monetization, higher capital expenditure (capex) needs, and increased financing costs [2][14][23]. - **Cumulative Cash Capex**: Estimated at $275 billion for FY26-FY28, compared to consensus estimates of $189 billion, indicating a substantial increase in investment needs [2][17][44]. Debt and Financing - **Debt Forecast**: Gross adjusted debt is projected to exceed $400 billion by FY28, with gross adjusted leverage anticipated to peak at over 5x, raising concerns about credit ratings and financing risks [2][41][40]. - **Lease Liabilities**: Expected to reach approximately $185 billion by FY30, contributing to the overall debt burden [13][40]. - **Financing Strategy**: Oracle is expected to pursue a piecemeal financing approach, potentially raising $65 billion in new bonds, $25 billion in new term loans, and $55 billion in chip-related financing solutions [42][50]. Market Position and Risks - **Execution Risks**: The company's ambitious GPUaaS revenue target of $130 billion by FY30 is viewed with skepticism due to potential counterparty risks and the significant capital intensity of the required infrastructure [27][28]. - **Credit Recommendations**: A cautious view is maintained on Oracle's credit, recommending buying 5Y CDS protection and selling benchmark bonds due to anticipated spread widening [24][66]. - **Core Business Performance**: Recent CIO survey data indicates no significant improvement in Oracle's core business strength, raising concerns about achieving aggressive revenue targets in AI Database and AI Data Platform segments [62][65]. Strategic Outlook - **GPUaaS Model**: The new GPUaaS operating model suggests a need for substantial investment and highlights the potential for earnings volatility if execution does not meet expectations [27][33]. - **Potential Upside**: While the current estimates reflect significant risks, there is potential for upside if Oracle can align equipment and lease costs effectively with customer contracts [53]. Conclusion Oracle Corporation faces a challenging landscape with substantial investment needs and execution risks associated with its ambitious GPUaaS strategy. The revised price target reflects a cautious outlook, balancing the potential for growth against the backdrop of increasing debt and financing pressures.