Wolfe Research on Oracle (ORCL): 'EPS So Good, Lost My Mind'

Wolfe Research analyst Alex Zukin reiterated an Outperform rating and $400.00 price target on Oracle (NYSE: ORCL).

The analyst comments "Key Thoughts. ORCL AI World was a capstone moment in an already momentous month. With debates around margins raging, ORCL chose to check mate the arguments by not only raising the bar on top line ($43B higher cumulative OCI revenue from FY26-30, at a 75% CAGR) but also surprising folks with not just an EPS CAGR (28% CAGR FY25-FY30, 32% FY26-FY30) but also a dollar target of $21 by FY30 which we believe is both a line in the sand and a signal. With $65B of new RPO from seven large deals across four customers (it's not all about OpenAI), ORCL crossed the half-trillion backlog target early which supports the increased growth outlook reaching $225B in FY30. Most interesting were new OCI revenue targets FY26-30 increasing cumulatively by $43B, to $166B in FY30. ORCL detailed how AI infrastructure delivery results in 35% gross margins over the life of contracts, with capacity build-out impacting margins in the first year recovering, with the 30-40% gross margins over the contract terms holding true for all of its customers. Walking the floor, excitement was palpable, but it was implementation planning that was different. The truth is most evident in our survey (of over 90 ORCL customers) with spend intentions picking up materially vs. last year (65% expect spend to increase vs. 44% last year, with 30% expecting a significant increase vs. 4% last year). On-prem to cloud transitions are driving the increased spend expectations, with customers feeling they will be left behind by AI if they don't act now (56% of nonOCI customers plan to adopt OCI due to cloud transitions vs. 33% and 19% in '24 and '23, respectively). ORCL's A-Day gave everyone what they wanted. Investors got profitability targets way ahead of expectations, customers got more direction on implementing AI, and we got more conviction in ORCL's LT product cycle and growth acceleration. We reiterate our OP rating and reiterate our PT of $400."

For an analyst ratings summary and ratings history on Oracle click here. For more ratings news on Oracle click here.

Shares of Oracle closed at $313.00 yesterday.

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