Investing.com -- Piper Sandler defended its Overweight rating on Oracle in a note to clients on Monday, arguing the company could generate approximately $2.2 billion in Oracle Cloud Infrastructure revenue not currently captured in consensus estimates, based on the firm's analysis of capital expenditure to data center capacity to revenue conversion.

Analyst Billy Fitzsimmons said Oracle "has remained a controversial name" in Piper Sandler's coverage, given ongoing concerns around capital requirements, AI monetization, customer concentration and margins.

However, the firm is "constructive given our OCI analysis, accelerating revenue growth, the new CFO potentially being a more prudent guider, and reasonable expectations for the apps business in FY27."

Using disclosures from Crusoe and CoreWeave as benchmarks, Piper Sandler estimated a baseline cost of approximately $46 million per megawatt and IaaS revenue of approximately $13.5 million per megawatt.

Applying those assumptions to Oracle's projected fiscal 2027 capital expenditure, the firm estimated approximately 2,400 megawatts of capacity could come online during the year.

Based on that capacity ramping over the course of fiscal 2027, Piper Sandler calculated net new OCI revenue of approximately $23.0 billion, compared to its current estimate of $20.8 billion, implying total fiscal 2027 OCI revenue of $41.1 billion.

Fitzsimmons described the potential incremental contribution as a "12% tailwind to FY27 OCI growth."

Oracle shares have pulled back following fourth-quarter results, which Piper Sandler said present an opportunity given the upside scenario its analysis supports.