Evercore ISI Reiterates Outperform Rating on Oracle
Evercore ISI analyst Kirk Materne reiterated an Outperform rating and $220.00 price target on Oracle (NYSE: ORCL).
“ORCL reported strong F3Q results, with revenue of $17.2bn landing ahead of Street ests. of $16.9bn and non-GAAP EPS of $1.79 vs. ests. of $1.70.
RPO grew by 325% y/y and expanded sequentially from $523bn to $553bn, and mgmt. flagged that the increase in RPO is related to large scale AI contracts where the company does not expect to have to raise any incremental funds.
OCI revenue grew 84% (+81% in c/c), accelerating from +68% in the prior quarter, and multicloud database revenue was up 531%, demonstrating that ORCL is firing on all cylinders in terms of its broader infrastructure strategy.
Total Cloud revenue came in at $8.9bn, up 41% in c/c (accelerating from +33% in the prior quarter), vs. Street ests. of $6.0bn.
IaaS grew 84% to $4.9bn and SaaS grew 13% to $4.0bn; Fusion ERP was up 17% (vs. 17% in the prior quarter) and NetSuite ERP was up 14% (vs. 13% in the prior quarter).
Capex came in at $18.6bn vs. $12bn last quarter as the company makes significant infrastructure investments to support its backlog.
Mgmt. guided to F4Q Cloud revenue growth of 46-50% (+44-48% in c/c) vs. Street ests. of ~47-48%, total revenue growth of 19- 21% (+18-20% in c/c) vs. Street ests. of 20%, and EPS of $1.96-2.00 vs.
Street ests. of $1.93.
While mgmt. maintained its FY26 guidance of $67bn of revenue and $50bn of capex, mgmt. raised its FY27 revenue guidance to $90bn, implying 34% y/y growth and ahead of Street ests. at $86.6bn.
In terms of key questions going into the call: 1) What is Oracle’s strategy for data-center development timelines?; 2) Is there any risk associated with large customer adoption?; 3) How well are OCI / Strategic Apps positioned in AI and what are the growth opportunities as new capacity comes in?; and 4) What is the impact to op. margins and does the company have additional sources of leverage?”
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