Morningstar

Oracle Earnings: Hefty Capital Expenditure Is a Burden of Rapid Growth

We’ve trimmed our fair value estimate of Oracle stock.

The Oracle logo is on display on a pavilion.
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Securities in This Article
Oracle Corp
(ORCL)

Key Morningstar Metrics for Oracle

  • Fair Value Estimate
    : $207.00
  • Morningstar Rating
    : ★★★
  • Morningstar Economic Moat Rating
    : Narrow
  • Morningstar Uncertainty Rating
    : Very High

What We Thought of Oracle’s Earnings

Oracle ORCL reported in-line fourth-quarter results, with total revenue up 21% to $19 billion and cloud revenue up 47% to nearly $10 billion. The company delivered more than 1.2 gigawatts of data center capacity in fiscal 2026, underpinning cloud infrastructure’s 77% year-over-year growth.

Why it matters: Strong market demand and solid data center ramp-up are exactly what Oracle needs to reach its long-term revenue goals. In addition to deploying $56 billion in capital expenditure in fiscal 2026, Oracle expects to increase total capital expenditure to $90 billion-$95 billion in fiscal 2027.

  • In the fourth quarter, Oracle’s global GPU utilization rate stood at 97.5%. 92% of the GPUs received contract renewals with their original customers, while the remaining 8% secured new customers within 90 days. Healthy market dynamics support Oracle to double down on its infrastructure investments.
  • Oracle’s biggest data center projects are on or ahead of their ramp-up schedules. Contracted data centers generally begin to deliver service within 18 months, consistent with the industry standard. The Bloom Energy partnership effectively alleviates power supply as a near-term bottleneck.

The bottom line: We trim our fair value estimate for narrow-moat Oracle to $207 per share from $220, primarily due to higher-than-expected capital expenditure forecasts, which have compressed the firm’s free cash flows. Shares look moderately undervalued following the 11% postearnings selloff.

  • We are of two minds about Oracle’s expanding capital expenditure. The $90 billion-$95 billion investment in fiscal 2027 should bring nearly 3 GW of new GPU cloud capacity online, translating to over $30 billion in recurring revenue once fully ramped up.
  • On the other hand, with $20 billion-$25 billion in customer prepayments and $40 billion in new debt and equity issuance, the remaining $30 billion in capital outlay will consume most of Oracle’s operating cash flow, pushing its balance sheet to its limit.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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