Oracle Corp. (ORCL) Conference Call Summary Company Overview - **Company**: Oracle Corp. (ORCL) - **Market Cap**: $651.6 billion - **Enterprise Value**: $758.1 billion - **Industry**: Americas Software Key Financial Metrics - **Current Price**: $223.01 - **Target Price**: $220.00 - **Price Change**: Downside of 1.3% - **Total Revenue (F2Q)**: $14.926 billion, 0.8% below consensus - **Cloud Revenue Growth**: +33% (constant currency), guidance was +34% - **Gross Margin**: -100 bps below expectations - **Operating Income**: -1.3% below expectations - **Capital Expenditures (CapEx)**: +44% above expectations, raised to $50 billion for FY26 - **Free Cash Flow (FCF) Burn**: ~2x higher than consensus Core Insights and Arguments - **Investor Concerns**: - Financing requirements and mega-tenant concentration risk, particularly related to OpenAI - Stock has declined 11% after the announcement, reflecting concerns over cloud revenue growth and CapEx increases without corresponding revenue uplift - **Management's Response**: - Committed to maintaining investment-grade status - Clarified that $100 billion+ in new financing is not required to fulfill existing backlog - Various approaches available to alleviate capital structure strain, including GPU leasing arrangements Revenue Guidance - **FY26 Revenue Guidance**: Reiterated at $67 billion - **FY27 OCI Guidance**: Raised by $4 billion to $36 billion, reflecting new capacity coming online Market Position and Competitive Landscape - **IaaS Market Position**: - Oracle is currently ranked 4 in the IaaS market, trailing behind AWS, Azure, and GCP - Notable customer wins include Uber, TikTok, and Zoom - Total Remaining Performance Obligations (RPO): $455 billion as of F1Q26 - **Strategic Applications**: - Steady execution in back-office applications (NetSuite and Fusion ERP) targeting both SMB and enterprise demand - Long-term opportunity to convert database support customers to Autonomous Database Risks and Considerations - **CapEx Impact**: - Elevated CapEx may weigh on EPS growth due to gross margin pressures and limited operating leverage - Uncertainty regarding revenue contribution from AI inferencing - **Balanced Risk-Reward**: - Despite early success in scaling OCI, the risk-reward remains balanced due to financial and operational uncertainties Financial Projections - **Revenue Projections**: - FY26: $67 billion - FY27: $86.3 billion - FY28: $118.2 billion - **EPS Projections**: - FY26: $7.38 - FY27: $7.99 - FY28: $10.21 - **P/E Ratios**: - FY26: 30.2x - FY27: 27.9x - FY28: 21.9x Additional Insights - **Long-term Financial Targets**: - FY29 revenue target of over $104 billion with >20% annual EPS growth - **Market Share Dynamics**: - Ongoing market share losses in the database segment, but potential for growth in IaaS and ERP markets - **Investment Framework**: - Oracle is well-positioned to sustain share gains in IaaS due to price/performance advantages, particularly for Generative AI workloads Conclusion - **Overall Rating**: Neutral - **Investment Outlook**: Continued execution and clarity on growth trajectory are needed before further investment commitments are made. The current environment presents a balanced risk-reward scenario for Oracle's stock. References - [1] - [2] - [15] - [16] - [20] - [22]