Key Stats for Oracle Stock
- Earnings Reaction: -10.83%
- Current Price: $148.08
- Valuation Model Target: $731.60
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What Happened?
Oracle Corporation (ORCL) shares plunged 10.83% following its latest earnings release, closing at $148.08.
The steep selloff occurred after the software and cloud infrastructure giant posted a mixed fiscal Q2 earnings report.
Oracle generated $16.06 billion in revenue, which narrowly missed the Wall Street consensus estimate of $16.19 billion.
However, the company reported a massive Adjusted EPS of $2.26, crushing the $1.64 estimate thanks to a $2.7 billion pretax gain from the sale of its interest in Ampere.
Despite the bottom-line beat, investors aggressively dumped the stock due to a shocking surge in capital expenditures.
Oracle’s free cash flow swung to a negative $10 billion as the company spent $12 billion on CapEx during the quarter to support its rapidly expanding cloud infrastructure.
The broader cloud computing industry is currently locked in an expensive AI arms race.
Hyperscalers are racing to secure land, power, and GPUs to meet unprecedented enterprise demand for artificial intelligence training and inferencing.
Wall Street panicked when Oracle management announced that full-year fiscal 2026 CapEx would be $15 billion higher than previously forecasted.
See analysts’ growth forecasts and price targets for Oracle stock (It’s free!) >>>
Is Oracle Undervalued Today?
The TIKR Model indicates that the market is severely overreacting to short-term cash flow metrics while completely ignoring Oracle’s historic revenue pipeline.
The model projects a massive target price of $731.60, representing a staggering 394.1% upside from current levels.
The underlying driver of this valuation is Oracle’s Remaining Performance Obligations (RPO), which skyrocketed 433% year-over-year to reach $523.3 billion.
During the earnings call, Principal Financial Officer Doug Kehring explained that this aggressive spending is required to service their unprecedented contract backlog.
Kehring stated verbatim: “We now expect fiscal 2026 CapEx will be about $15 billion higher than we forecasted after Q1. Finally, we are confident that our customer backlog is at a healthy level and that we have the operational and financial strength to execute successfully.“
Chief Executive Officer Clay Magouyrk also defended the company’s financial strategy and downplayed fears that Oracle would need to borrow astronomical amounts to fund the buildout.
Magouyrk clarified verbatim: “Based on what we see right now, we expect we will need less, if not substantially less money raised than that amount to go and fund this buildout.“
Read the full Oracle Transcript on TIKR to see the cloud infrastructure breakdown >>>
Valuation Deep Dive
The TIKR Advanced Valuation Model identifies Oracle as a hyper-growth cloud infrastructure provider trading at a temporary discount due to its massive investment cycle.
- Target Price: $731.60
- Current Price: $148.08
- Annualized Return: 45.3%
The OCI Margin Catalyst: While current CapEx is heavily weighing on free cash flow, Oracle operates with a highly efficient deployment model. The company does not incur cash expenses for its large data centers until they are fully operational and handed over to customers. As Oracle brings its pipeline of new GPU clusters online, gross margins for AI workloads are projected to rapidly scale toward the 30% to 40% range.
The Multicloud AI Database Moat: Oracle is successfully pivoting its legacy database business into the AI era. By vectorizing its database and integrating an AI data platform, the company is enabling major language models to perform multistep reasoning on secure, private enterprise data. Furthermore, Oracle’s Multicloud strategy allows customers to run Oracle database services directly inside competing clouds like AWS, Azure, and Google Cloud, creating an inescapable software ecosystem.
Conclusion: A generational infrastructure buildout creating historic upside. With a projected +394.1% total return potential, Oracle offers patient investors a rare opportunity to buy into a massive AI backlog at a steep discount. The path to $731 is secured by accelerating cloud revenue, a $523 billion contract pipeline, and a dominant position in enterprise data management.
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How Much Upside Does Oracle Stock Have From Here?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
