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Bull: Bull (20%): Hyper-growth cloud adoption drives value to $282.14.
Valuation models heavily favor forward-looking earnings over the near-term FCF distortion caused by AI CapEx.
Oracle is successfully transitioning its massive, sticky enterprise install base to its Generation 2 Cloud (OCI) while capturing new AI infrastructure workloads. This dual engine is driving top-line acceleration. While the ongoing transformation build-out temporarily depresses FCF, the underlying operating cash flow remains robust.
Oracle is successfully transitioning its massive, sticky enterprise install base to its Generation 2 Cloud (OCI) while capturing new AI infrastructure workloads. This dual engine is driving top-line acceleration. While the ongoing transformation build-out temporarily depresses FCF, the underlying operating cash flow remains robust.
Massive, sticky enterprise database install base with extreme switching costs.
Integrated Generation 2 Cloud (OCI) capturing emerging AI workloads.
Valuation models heavily favor forward-looking earnings over the near-term FCF distortion caused by AI CapEx.
Buy. Oracle's structural transition to cloud and AI workloads provides a durable growth engine, compensating for near-term capital expenditure distortions.
Oracle Corporation offers products and services that address enterprise information technology environments worldwide. Its Oracle cloud software as a service offering include various cloud software applications, including Oracle Fusion cloud enterprise resource planning ERP, Oracle Fusion cloud enterprise performance management EPM, Oracle Fusion cloud supply chain and manufacturing management SCM, Oracle Fusion cloud human capital management HCM, and NetSuite applications suite, Oracle Health applications, as well as Oracle Fusion Sales, Service, and Marketing. The company also offers cloud-based industry solutions for various industries; Oracle cloud license and on-premise license; and Oracle license support services. In addition, it provides cloud and license business' infrastructure technologies, such as the Oracle Database and MySQL Database; Java, a software development language; and middleware, including development tools and others. The company's cloud and license business' infrastructure technologies also comprise cloud-based compute, storage, and networking capabilities; and Oracle autonomous database, as well as AI, Internet-of-Things, machine learning, digital assistant, and blockchain. Further, it provides hardware products and other hardware-related software offerings, including Oracle engineered systems, enterprise servers, storage solutions, industry-specific hardware, virtualization software, operating systems, management software, and related hardware support services, and consulting and advanced customer services. It markets and sells its cloud, license, hardware, support, and services offerings directly to businesses in various industries, government agencies, and educational institutions, as well as through indirect channels. Oracle Corporation has a strategic alliance with Metron, Inc. The company was founded in 1977 and is headquartered in Austin, Texas.
A heavy capital expenditure cycle yields lower-than-expected ROIC. FCF remains severely depressed as CapEx scales, while legacy on-premise revenue deteriorates faster than OCI growth can offset, stressing the $104B debt load.
Massive, sticky enterprise database install base with extreme switching costs.
Integrated Generation 2 Cloud (OCI) capturing emerging AI workloads.
High-margin recurring maintenance and support revenues.
Economic profit is supported when reported returns exceed the company cost-of-capital hurdle.
Unavailable
FCFF DCF remains positive at the base case: base FCFF $11.5B after capex $10.2B, with terminal value at 63.7% of enterprise value. No FCF cliff is projected unless capex/ or materially resets.
Bull (20%): Hyper-growth cloud adoption drives value to $282.14.
Monitor earnings quality, guidance, and valuation-sensitive operating metrics.
Monitor earnings quality, guidance, and valuation-sensitive operating metrics.
Monitor earnings quality, guidance, and valuation-sensitive operating metrics.
Peak transformation build; heavy CapEx ($21.2B) temporarily suppressing reported free cash flows.
Unprecedented corporate demand for AI infrastructure drives structurally higher OCI capacity utilization.
Broad enterprise IT budget contraction delays major database cloud migrations.
Peak transformation build; heavy CapEx ($21.2B) temporarily suppressing reported free cash flows.
Core position within a mature quality compounder allocation.
Trim exposure if valuation nears the $282.14 bull case or if OCI revenue growth permanently decelerates.
Valuation models heavily favor forward-looking earnings over the near-term FCF distortion caused by AI CapEx.
The multi-stage moat fade model effectively anchors valuation, crediting the sticky enterprise base.
Downside case: Valuation models heavily favor forward-looking earnings over the near-term FCF distortion caused by AI CapEx.
Capture your own thesis, position size, and follow-up questions. Stays on this device, only you can see it.
Bear (20%): Hyperscaler competition limits OCI, dropping value to $188.36.
Dominant hyperscalers aggressively slash AI workload pricing, permanently compressing OCI's structural gross margins.
Prolonged high interest rates combined with $104B in debt restricts operational agility and forces dilutive equity raises.
Enterprise customers migrate off legacy Oracle databases to cheaper, cloud-native open-source alternatives faster than anticipated.
The five developments that would weaken our investment case.
Rapid OCI revenue growth is essential to counterbalance structural revenue declines in legacy on-premise licensing. Slower cloud infrastructure expansion causes total top-line growth to stagnate, undermining premium valuation multiples that price Oracle as an emerging hyperscale cloud winner.
Current:Revenue growth was 8.4% for the period ended 2025-05-31.
Alert ifDecelerates below 25% year-over-year over two consecutive quarters.
Gross margin erosion signals aggressive price competition from incumbent hyperscalers and underutilized data center infrastructure. A sustained margin decline compresses cash flow generation, preventing Oracle from funding heavy AI capital expenditures organically and impairing operating profitability.
Current:Gross margin was 70.5% for the period ended 2025-05-31.
Alert ifContracts by over 200 bps year-over-year over any trailing twelve-month period.
Extended high capital spending without commensurate return on invested capital drains free cash flow and exacerbates leverage risks. Continued elevated investment beyond the initial buildout cycle indicates inefficient infrastructure utilization and risks structural return on capital erosion.
Current:ROIC was 10.6% as of the report's 2026-05-07 analysis date.
Cerner was Oracle's largest acquisition, intended to anchor vertical cloud expansion in healthcare. Inability to capture guided cost and revenue synergies depresses overall operating margins, reduces return on invested capital, and exposes the company to substantial goodwill impairment charges.
Current:Operating margin was 31.5% for the period ended 2025-05-31.
Alert if
Each lens answers a different valuation question. Only included lenses set Fair value; floors and diagnostics provide context.
Project SBC-adjusted EPS, discount each year's earnings at cost of equity, then add a Gordon-growth terminal value.
This edition does not contain enough finite inputs to reproduce the lens calculation.
Project EPS through the explicit advantage period, fade growth as competition catches up, and discount the full stream at cost of equity.
This edition does not contain enough finite inputs to reproduce the lens calculation.
Apply a terminal P/E to the dated forward EPS path, then discount that future share value back to the analysis date.
This edition does not contain enough finite inputs to reproduce the lens calculation.
Convert the revenue and margin path into after-tax free cash flow, discount the annual per-share amounts and terminal value at , then adjust for signed per current share.
Add depreciation to net income, subtract maintenance capex, divide by diluted shares, and apply a normalized valuation multiple.
Multiply the peer median PEG by this stock's forecast growth to derive an implied forward P/E, then apply it to forward EPS.
Base (60%): OCI scales efficiently yielding a $234.02 fair value.
Monitor earnings quality, guidance, and valuation-sensitive operating metrics.
Warning level: Decelerates below 25% year-over-year over two consecutive quarters. Rapid OCI revenue growth is essential to counterbalance structural revenue declines in legacy on-premise licensing. Slower cloud infrastructure expansion causes total top-line growth to stagnate, undermining premium valuation multiples that price Oracle as an emerging hyperscale cloud winner.
Warning level: Contracts by over 200 bps year-over-year over any trailing twelve-month period. Gross margin erosion signals aggressive price competition from incumbent hyperscalers and underutilized data center infrastructure. A sustained margin decline compresses cash flow generation, preventing Oracle from funding heavy AI capital expenditures organically and impairing operating profitability.
Warning level: CapEx-to-revenue ratio remains above 20% for more than four consecutive quarters. Extended high capital spending without commensurate return on invested capital drains free cash flow and exacerbates leverage risks. Continued elevated investment beyond the initial buildout cycle indicates inefficient infrastructure utilization and risks structural return on capital erosion.
Warning level: Net debt-to-EBITDA ratio exceeds 4.0x over any trailing twelve-month measurement window. Excessive debt leverage restricts capital allocation flexibility and elevates refinancing risks during periods of higher interest rates. Breaching safe leverage thresholds limits operational investment capacity, threatens credit rating downgrades, and could compel dilutive equity financing.
Warning level: Operating margin falls below 30.0% over two consecutive quarters due to integration cost overruns or filed write-down of Cerner acquisition goodwill. Cerner was Oracle's largest acquisition, intended to anchor vertical cloud expansion in healthcare. Inability to capture guided cost and revenue synergies depresses overall operating margins, reduces return on invested capital, and exposes the company to substantial goodwill impairment charges.
| $49.95B |
| $52.96B |
| $57.40B |
| +10.6% |
| Gross profit | $33.56B | $36.39B | $37.82B | $40.47B | +6.4% |
| Operating income | $10.40B | $12.63B | $15.26B | $17.74B | +19.5% |
| Net income | $6.72B | $8.50B | $10.47B | $12.44B | +22.8% |
| EPS (diluted) | $2.41 | $3.07 | $3.71 | $4.34 | +21.7% |
| EBITDA | $13.53B | $18.74B | $21.39B | $23.91B | +20.9% |
| R&D | $7.22B | $8.62B | $8.92B | $9.86B | +11.0% |
| SG&A | $9.36B | $10.41B | $9.82B | $10.25B | +3.1% |
Capital allocation should be evaluated against reinvestment needs, balance-sheet strength, and shareholder returns.
| Revenue | 57,399,000,000 |
|---|---|
| Cost of revenue | 16,927,000,000 |
| Gross profit | 40,472,000,000 |
| Operating expenses | 22,420,000,000 |
| Operating income | 18,052,000,000 |
| Non-operating items and tax | -5,609,000,000 |
| Net income | 12,443,000,000 |
| Total assets | 168,361,000,000 |
|---|---|
| Cash | 10,786,000,000 |
| Current assets | 24,579,000,000 |
| Total liabilities | 147,392,000,000 |
| Current liabilities | 32,643,000,000 |
| Shareholders’ equity | 20,451,000,000 |
Point-in-time financial data used in the 2026-05-07 analysis.
| Period | Revenue | EBITDA | Net income | Operating cash flow | Free cash flow | Capex | Depreciation and amortization | Stock-based compensation | Share repurchases | Dividends paid | Net debt issuance | Investing cash flow | Financing cash flow | Beginning cash | Ending cash | Cash and investments | Total debt | Operating margin | ROIC | WACC | ROIC − WACC spread |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022-05-31 | 42.4B | 13.5B | 6.7B | 9.5B | 5B | 4.5B | 3.1B | 2.6B | 17.3B | 3.5B | -8.3B | — | — | — | — | 21.4B | 75.9B | 37.3% | — | 5.5% | — |
| 2023-05-31 | 50B | 18.7B | 8.5B | 17.2B | 8.5B | 8.7B | 6.1B | 3.5B | 2.5B | 3.7B | 12.9B | — | — | — | — | 9.8B | 90.5B | 27.6% | — | 6.8% | — |
| 2024-05-31 | 53B | 21.4B | 10.5B | 18.7B | 11.8B | 6.9B | 6.1B | 4B | 3.2B | 4.4B | -3.7B | — | — | — | — | 10.5B | 93.1B | 30.3% | — | 7.6% | — |
| 2025-05-31 | 57.4B | 23.9B | 12.4B | 20.8B | -394M | 21.2B | 6.2B | 4.7B | 1.5B | 4.7B | 5.6B | — | — | — | — | 10.8B | 104.1B | 31.5% | — | — | — |
ORCL trades at 24.2x forward earnings against a peer median of 65.8x; EV/EBITDA of 25.0x against a peer median of 94.8x; 5 peers.
| Accumulate below the fair value midpoint of $234.02. |
Bull: Bull (20%): Hyper-growth cloud adoption drives value to $282.14.
Alert ifCapEx-to-revenue ratio remains above 20% for more than four consecutive quarters.
This edition does not contain enough finite inputs to reproduce the lens calculation.
This edition does not contain enough finite inputs to reproduce the lens calculation.
This edition does not contain enough finite inputs to reproduce the lens calculation.
| Palantir Technologies Inc. |
| 65.8x |
| 61.4x |
| 154.9x |
| 32.6% |
| 46.2% |
| PANW | Palo Alto Networks Inc. | 46.3x | 15.1x | 94.8x | 16.3% | 15.5% |
| CRWD | CrowdStrike Holdings Inc. | 75.9x | 24.8x | -2,450.4x | -4.1% | 1.0% |
