Oracle Earnings: Solid Execution Secures Revenue Target and Mitigates Investor Concerns

Key Morningstar Metrics for Oracle

• Fair Value Estimate

  : $220

• Morningstar Rating

  : ★★★★

• Morningstar Economic Moat Rating

  : Narrow

• Morningstar Uncertainty Rating

  : Very High

What We Thought of Oracle’s Earnings

Oracle ORCL delivered outstanding third-quarter results ahead of expectations, with total revenue up 22% to $17 billion and cloud revenue up 44% to $9 billion. Most importantly, cloud infrastructure revenue expanded 84% to $5 billion, and it is the main contributor to Oracle’s quarterly outperformance.

Why it matters: We are content with Oracle’s pace to expand its data center footprint. Demand for AI training and inference continues to outgrow supply, which supports our accelerating growth outlook for Oracle Cloud Infrastructure. OCI revenue should grow 77% in fiscal 2026 and 117% in fiscal 2027.

• Ninety percent of the 400-megawatt data center capacity Oracle delivered in the quarter was on or ahead of schedule. Considering the scale of OCI’s buildout, a strong record of on-time delivery is evidence of solid execution that should maintain customer trust and enable faster time to revenue.

The bottom line: We raise our fair value estimate for narrow-moat Oracle to $220, from $215 previously, based on higher-than-expected near-term demand for AI compute. Shares look undervalued following the stock’s 8% after-hours rally.

• Clarity around Oracle’s funding and market demand can mitigate investor concerns around OCI’s future growth. However, we reiterate our Very High Morningstar Uncertainty Rating for Oracle, as the demand and competitive landscape for AI cloud can change rapidly over the long term.
• Our base case assumes that AI infrastructure will continue to see high demand that allows Oracle to reach its $225 billion revenue goal by fiscal 2030. In this case, there is a clear path for Oracle stock to converge with our fair value estimate as a result of on-time capacity delivery each quarter.

Coming up: Besides reiterating its fiscal 2026 total revenue guidance of $67 billion and capital expenditure guidance of $50 billion, management raised its fiscal 2027 revenue guidance to $90 billion, a $5 billion increase from last October’s investor meeting.