Company Overview
Oracle Corporation operates as a leading enterprise software and cloud infrastructure provider, offering an integrated technology stack spanning from database management systems to comprehensive cloud services. The company has positioned itself as a critical player in the enterprise cloud market, delivering end-to-end solutions that combine infrastructure and cloud services for large-scale business operations.
Strong Financial Performance Drives Optimistic Outlook
Oracle delivered robust fourth-quarter FY26 results, with revenue meeting expectations whilst profit after tax and minority interests (PATMI) exceeded forecasts. Full-year FY26 performance was equally impressive, with revenue and PATMI reaching 101% and 115% of analyst projections respectively. The company achieved remarkable 21% year-on-year revenue growth in the fourth quarter, primarily driven by Oracle Cloud revenue surging 47% compared to the previous year.
Unprecedented Revenue Visibility and Growth Acceleration
Oracle has established exceptional revenue visibility through its Remaining Performance Obligations (RPO), which rose an extraordinary 4.6 times to reach US$638 billion. This massive backlog underpins Oracle’s confidence in accelerating revenue growth to 34% year-on-year in FY27, a significant jump from FY26’s 16% growth rate.
The Cloud Infrastructure business represents the primary growth engine, with revenue projections showing a remarkable 109% surge. Oracle’s infrastructure expansion is gaining substantial momentum, with first-quarter FY27 additions approaching 1 gigawatt of capacity, nearly matching FY26’s entire annual addition of 1.2 gigawatts.
Strategic Partnerships and Infrastructure Expansion
Oracle has secured transformative partnerships, most notably OpenAI’s five-year US$300 billion Oracle Cloud Infrastructure commitment beginning in 2027. This partnership is expected to receive additional support from OpenAI’s anticipated initial public offering, which could provide capital for fulfilling FY27 obligations.
The company’s ambitious infrastructure expansion includes five major Stargate sites. The flagship Abilene, Texas campus is 42% complete and targeted to deliver 1.2 gigawatts by end-2026. Four additional sites across Texas, New Mexico, Michigan, and Wisconsin are under construction, with deliveries commencing in 2027. This expansion is expected to scale total capacity to 7 gigawatts, progressing towards Oracle’s ultimate 10 gigawatt target.
Investment Recommendation and Valuation
Phillip Securities Research maintains a BUY rating with a revised discounted cash flow target price of US$237, reduced from the previous US$275. This adjustment reflects increased FY27e capital expenditure guidance of US$70 billion, net of US$20 to US$25 billion in customer prepayments, and is substantially higher than initial estimates of US$47 billion. The weighted average cost of capital and growth assumptions remain unchanged.
The substantial US$75 billion in bookings under the new funding model over two quarters, representing 12% of RPO, demonstrates strong customer preference for Oracle’s comprehensive technology stack despite prepayment requirements and bring-your-own-hardware conditions.
Frequently Asked Questions
Q: What was Oracle's revenue growth performance in the most recent quarter?
A: Oracle achieved 21% year-on-year revenue growth in 4Q26, primarily driven by Oracle Cloud revenue growth of 47% compared to the previous year.
Q: How much has Oracle's contracted revenue backlog increased?
A: Oracle's Remaining Performance Obligations (RPO) contracted rose dramatically by 4.6 times to reach US$638 billion, providing exceptional revenue visibility.
Q: What is Oracle's revenue growth projection for FY27?
A: Oracle expects revenue growth to accelerate significantly to 34% year-on-year in FY27, compared to 16% growth achieved in FY26.
Q: What is the significance of the OpenAI partnership?
A: OpenAI has committed to a five-year US$300 billion Oracle Cloud Infrastructure agreement starting in 2027, with OpenAI's expected IPO providing additional capital to support these obligations.
Q: How much is Oracle planning to invest in capital expenditure?
A: Oracle has raised its FY27 CAPEX guidance to US$70 billion, net of US$20 to US$25 billion in customer prepayments, substantially higher than initial estimates of US$47 billion.
Q: What is Phillip Securities Research's investment recommendation?
A: Phillip Securities Research maintains a BUY rating with a target price of US$237, revised down from the previous US$275 due to increased capital expenditure requirements.
Q: What infrastructure expansion is Oracle undertaking?
A: Oracle is constructing five major Stargate sites, including the Abilene, Texas campus, which is 42% complete, targeting 1.2 GW by end-2026. Four additional sites across multiple states, scaling total capacity to 7 GW toward a 10 GW target.
Q: How much has Oracle secured in new bookings recently?
A: Oracle secured US$75 billion in bookings under the new funding model over two quarters, representing 12% of its total RPO and demonstrating strong customer demand.
This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst.
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