Morningstar

Oracle Earnings: More Focus on Capacity Delivery as Cloud Infrastructure Ramps at Scale

We lower our fair value estimate for 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

What We Thought of Oracle’s Earnings

Oracle’s ORCL second-quarter results missed our expectations on multiple fronts. Cloud Applications’ 11% growth saw some sequential acceleration, but Cloud Infrastructure’s 68% expansion was at least 300 basis points below management’s full-year growth target for the OCI segment.

Why it matters: Oracle’s $68 billion quarterly addition of remaining performance obligations, while still large, is a noticeable deceleration in growth momentum from last quarter’s breakout results. This signals Oracle is allocating less to sales and more to service delivery.

  • We believe Oracle is on track with its data center buildout. Accounts payable nearly doubled over the past six months. Capital expenditure also grew more than 320% annually to over $20 billion in the first half of fiscal 2026, necessary to support our robust revenue growth outlook.
  • That said, deferred revenue only increased $600 million over the past six months, underpinning Oracle’s pressure to convert its bookings into revenue. Cash flow from the rapid conversion of bookings is necessary to support OCI’s continued ramp-up.

The bottom line: We reduce our fair value estimate for wide-moat Oracle to $286 per share, from $340. We lowered our long-term earnings outlook as delivering Oracle’s planned capacity on time now proved to be a harder task. However, we continue to view shares as undervalued.

  • We think recent investor scrutiny on artificial intelligence’s potential and circular GPU deals can be overly punitive to key AI suppliers like Oracle. Oracle remains a respectable cloud provider that enjoys strong switching costs across its database, application, and infrastructure lineup.

Coming up: Management reiterated its full-year revenue guidance of $67 billion. The company also expects cloud revenue to grow between 40% and 44% for the third quarter, leading to total revenue growth of between 19% and 21%.

  • To reach its guidance, OCI and OCA both need to see growth acceleration in the second half of fiscal 2026.

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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