12 September 2025 | 11:18AM PDT Oracle Corp. (ORCL) Updating Model and PT following F2Q26 Results ORCL 12m Price Target: $310.00 Price: $307.86 Upside: 0.7% We are raising our PT on Oracle to $310 but maintaining our Neutral rating following F2Q26 results. F2Q26 results came in below consensus on Revenue (-1%), Gross Profit (-3%), while OpM came in +60bps above; FCF was -123% vs. consensus, as CapEx came in +62% higher than expected. What stood out was the substantial revision to OCI revenues over the next ...

Core Insights - Oracle's NetSuite Cloud ERP is a significant growth driver for its cloud strategy, with Q4 FY25 revenues increasing 18% year-over-year to $1.0 billion, highlighting its importance in Oracle's SaaS portfolio [1][9] - The transition to cloud-based, AI-driven ERP solutions is a major growth engine for Oracle, as traditional on-premises systems cannot leverage advanced AI features, leading businesses to adopt NetSuite or Fusion ERP for improved automation and efficiency [2] - Oracle's cloud revenues are projected to grow 29% year-over-year to $31.6 billion in fiscal 2026, supported by strong infrastructure services and a healthy pipeline indicated by a projected doubling of its RPO [3] Future Projections - Oracle anticipates cloud revenues to increase over 40% in fiscal 2026, with infrastructure revenue expected to rise by 70%, driven by AI innovation and global data center expansion [4] - The company is positioned for consistent double-digit SaaS growth, reinforcing its leadership in the enterprise cloud market [4] Competitive Landscape - Microsoft Dynamics 365 is a strong competitor, known for its integration with the Microsoft ecosystem, offering versatility, customization, and cost advantages over Oracle [5] - SAP SE holds a leadership position in the ERP market with a 17% share, focusing on cloud and AI to accelerate growth, supported by a robust global support network and industry-specific solutions [6] Financial Performance - Oracle's shares have appreciated 33.8% year-to-date, outperforming the Zacks Computer and Technology sector and the Zacks Computer - Software industry [7] - The Zacks Consensus Estimate for Oracle's fiscal 2026 revenues is $66.60 billion, indicating a 19.38% year-over-year growth, with earnings projected at $6.73 per share, reflecting an 11.61% increase from fiscal 2025 [13]

Core Insights - Oracle is aggressively expanding its cloud services, with total cloud revenues increasing by 27% year-over-year in Q4 and projected to grow over 40% in fiscal 2026, driven by infrastructure expansion and demand for AI workloads [1][9] Group 1: Cloud Revenue Growth - Total cloud revenues climbed 27% year-over-year in Q4, contributing to a 24% annual increase in fiscal 2025 [1][9] - Management projects cloud revenue growth of over 40% in fiscal 2026, fueled by aggressive infrastructure expansion and strategic multi-cloud alliances [1][9] Group 2: Multi-Cloud Strategy - Oracle operates 23 data centers and plans to add 47 more within a year, enhancing its multi-cloud capabilities [2] - Integration with Amazon AWS, Microsoft Azure, and Google Cloud allows enterprises to run Oracle Database services across multiple environments, resulting in a 115% sequential increase in multi-cloud database revenues in Q4 [2] Group 3: Cloud Application Portfolio - Oracle's cloud application portfolio, including Fusion ERP and NetSuite, continues to drive double-digit growth [3] - The company is embedding AI across its cloud stack to meet enterprise demand for AI-ready infrastructure [3] Group 4: Remaining Performance Obligations (RPO) - Oracle's Remaining Performance Obligations (RPO) increased by 41% to $138 billion, with nearly 80% tied to cloud services and one-third expected to convert within the next year [4] Group 5: Competitive Landscape - Amazon Web Services (AWS) holds a dominant position in the cloud market with a 31-32% global share, supported by over $100 billion in annual data center investment [5] - Google Cloud Platform (GCP) is gaining traction with a 32% year-over-year revenue growth and significant enterprise contracts, positioning it as a strong competitor to Oracle [6] Group 6: Stock Performance and Valuation - Oracle's shares have appreciated 40.4% year-to-date, outperforming the Zacks Computer and Technology sector [7] - The forward 12-month Price/Sales ratio for Oracle is 9.45x, higher than the Zacks industry average of 8.34x, indicating potential overvaluation [10] Group 7: Revenue and Earnings Estimates - The Zacks Consensus Estimate for Oracle's fiscal 2026 revenues is $66.60 billion, reflecting a 16.02% year-over-year growth [13] - The consensus estimate for fiscal 2026 earnings is $6.73 per share, suggesting an 11.61% growth over fiscal 2025 [13]

Core Viewpoint - Oracle's cloud business is experiencing significant growth, with multiple large cloud service agreements signed, including one expected to generate over $30 billion in annual revenue starting from fiscal year 2028, leading to a surge in stock price to historical highs [1] Group 1: Cloud Business Performance - Oracle's multi-cloud database revenue continues to grow at over 100% year-on-year, indicating strong market demand [1] - The company reported a strong start to fiscal year 2026, with expectations that the new agreements will not impact the fiscal year 2026 performance guidance [1] Group 2: Analyst Upgrades - Stifel analysts upgraded Oracle's rating from hold to buy and raised the target price from $180 to $250, an increase of nearly 39% [4] - The report highlights sustainable cloud business growth and operational cost management as key drivers for accelerated earnings growth in fiscal year 2027 and beyond [4] Group 3: AI and Market Position - Oracle has become a preferred third-party cloud service provider for leading AI model companies, with four out of five major AI language model manufacturers utilizing its data centers [5] - The company's cloud infrastructure has emerged as a rapid growth alternative to industry giants like Amazon, Microsoft, and Alphabet, contributing to a 60% stock price increase last year, the best performance since 1999 [5] Group 4: Financial Performance - Following a strong fourth-quarter earnings report, Oracle's stock price surpassed the record high set in December of the previous year [6] - The company's core cloud applications, particularly Fusion ERP and NetSuite, have shown significant acceleration in growth, driven by enterprises migrating to the cloud to leverage AI capabilities [8]

Group 1 - The core viewpoint of the articles is that Oracle's strong financial performance indicates a shift in the back-office supercycle from the SAP ecosystem to a broader ERP cloud market, driven by AI capabilities [1][3][5] - Morgan Stanley analysts noted that AI is becoming a significant catalyst for enterprises to upgrade their back-office systems to the cloud, as all AI functionalities are only available in cloud environments [1][3] - Oracle's Q4 FY2025 results exceeded expectations, particularly in SaaS cloud applications, with Fusion ERP growth accelerating from 18% to 22% year-over-year, and NetSuite ERP growth increasing from 17% to 18% [1][3] Group 2 - Oracle's CEO, Safra Catz, emphasized during the earnings call that the demand for AI capabilities is driving customers to migrate from on-premises products to the cloud, aligning with similar comments from SAP's CEO [3][8] - Historical context shows that SAP has been leading the back-office supercycle due to its aggressive cloud migration strategy, while Oracle's Fusion and NetSuite businesses have only recently seen similar growth acceleration [5][8] - A CIO survey by Morgan Stanley indicated that leveraging AI capabilities is a primary catalyst for CIOs to upgrade ERP platforms to the cloud, with 82% citing digital transformation and 48% mentioning AI capabilities as key drivers [5][8]

Core Viewpoint - ServiceNow and Oracle are positioned to benefit from the growing digital transformation market, which is projected to reach approximately $4 trillion by 2027, with a CAGR of 16.2% from 2022 to 2027 [1] Group 1: Company Performance - ServiceNow shares have decreased by 7.7% year to date, while Oracle shares have dropped by 10.4% due to a tech sell-off influenced by higher tariffs and a challenging macroeconomic environment [2] - ServiceNow's Yokohama release introduces new AI agents across various domains, enhancing productivity and workflow efficiency [5] - ServiceNow's customer base has expanded, with 508 customers having more than $5 million in annual contract value (ACV), representing a 20% year-over-year growth [7] - ServiceNow expects second-quarter subscription revenues to be between $3.03 billion and $3.035 billion, indicating a year-over-year increase of 19% to 19.5% [8] - Oracle anticipates total revenue growth of 9-11% year over year for the third quarter of fiscal 2025, with cloud revenues expected to grow by 24-28% at constant currency [11] Group 2: Strategic Partnerships and Innovations - ServiceNow has established partnerships with major companies like NVIDIA, Amazon, and Vodafone to enhance its AI capabilities and service management solutions [6][10] - Oracle's partnerships with companies such as OpenAI and NVIDIA are driving its cloud business momentum, particularly with the launch of AI Agent Studio [9][10] Group 3: Earnings Estimates and Valuation - The Zacks Consensus Estimate for ServiceNow's 2025 earnings is $16.48 per share, reflecting an 18.39% increase over fiscal 2024, while Oracle's estimate has declined to $6.03 per share, suggesting 8.45% growth [12] - ServiceNow has consistently beaten earnings estimates, with an average surprise of 6.61%, compared to Oracle's surprise of 0.83% [13] - In terms of valuation, Oracle shares are trading at a forward Price/Sales ratio of 6.47X, which is lower than ServiceNow's 14.62X, indicating that Oracle may be a cheaper option [14] Group 4: Market Position and Outlook - Both companies are benefiting from strong demand for digital transformation despite macroeconomic challenges and tariff concerns [17] - ServiceNow's strong portfolio and partner base are highlighted as advantages over Oracle, which faces stiff competition and security issues in the cloud computing market [17]