Guggenheim Reaffirms Buy on Oracle, $400 Price Target
Guggenheim analyst John DiFucci reiterated a Buy rating and $400 price target on Oracle (NYSE: ORCL).
“Oracle reported a strong F1Q27, guided F2Q27 in line with the Street, and increased FY27 guide.
Those tactical thresholds are typically something investors want to see, but looking closer at the numbers indicates a more positive conclusion, and incremental details disclosed by management paint an even brighter future.
Per the first point, F1Q Cloud Services and IaaS revenue grew 62% and 121% cc, respectively, versus consensus at 60% and 117%, and the buyside at about 61% and 118.5% per our TMT desk.
F2Q guidance for 64-70% Cloud Services growth was above both consensus and the Street at 65%.
FY27 guidance was raised to $1.10 EPS on $90+B revenue from $1.05 and $90B.
Incremental details that paint an even brighter future include: 850MW new capacity in the Q (more than 2/3 of all FY26); $30B new AI IaaS bookings that will not require an increase in capital to be raised, implying upfront payments and perhaps some BYOH; renewals of AI IaaS contracts in the quarter at 120% of their original value (with same GPUs); GPU utilization of 97.9%; impressive GPU longevity of 4 years or longer – so far – for most that came up for renewal (it’s unclear how long the useful life is, but the depreciable life is 6 yrs); IaaS will accelerate in each FY27 Q.
Beyond AI IaaS, ORCL completed the $20B ATM. Multicloud database revenue grew 353% y/y and customer count grew 180%, and Multicloud regions increased to 70.
We realize revenue here is still relatively small, but we heard of broader adoption in the field this Q.
One area of modest performance was SaaS that grew 10% due to slower NetSuite growth, with Fusion Apps growing 14%, Oracle Health continuing to accelerate (which we expect to persist), and industry apps growing > 20%.
We expect AI capabilities to drive incremental Apps growth in the future per our field work.
We reiterate ORCL as our Best Idea with a price target of $400, that may seem far from here, but we believe it is not only plausible, but likely in due time.”
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