Oracle Corporation (ORCL): what the price assumes

In the published model solve dated 2026-Q2, anchored at $150.95, Oracle Corporation (ORCL) is priced for +16.0% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-08-07.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/ORCL

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Solve inputs: computed at a 8.7% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.8%); the inversion above states its own rate.

Per-Model Detail (n=13)

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Bullet Takeaways

• The contracted book Oracle has signed but not yet recognized as revenue reached 638 billion dollars at the May 2026 year end against 138 billion a year earlier, and management expects roughly 12% of it to convert to revenue over the following twelve months.
• Serving that book is expensive: property and equipment purchases ran 55.7 billion dollars in fiscal 2026 against 32.0 billion of operating inflows, a shortfall of about 23.7 billion dollars covered by issuance.
• Watch the funding calendar rather than the bookings: Oracle raised 43 billion in debt and 5 billion in equity during fiscal 2026 and expects roughly 40 billion more in fiscal 2027, including a 20 billion common stock program registered on June 23, 2026.

Bull Case

One number decides this argument, and it is neither a multiple nor a growth rate. It is the size of the business Oracle has already signed and not yet delivered. The fiscal 2026 annual report states it without ornament: "Remaining performance obligations were $638 billion and $138 billion as of May 31, 2026 and 2025, respectively." Twelve months earlier that book ran a little over twice one year's sales. It now runs close to ten times them. Management expects to recognize roughly 12% of it over the following twelve months, which on its own exceeds the 67.4 billion dollars of revenue the whole company produced in fiscal 2026.

The engine underneath is infrastructure, not applications, and that flip happened fast. The 10-K reports that "Our cloud infrastructure revenues represented 53%, 42% and 35% of our total cloud revenues during fiscal 2026, 2025 and 2024, respectively." In dollars, that line went from 10.2 billion to 18.1 billion in a single year while total cloud reached 34.0 billion. In fiscal 2024 the larger share of that cloud revenue was applications; by fiscal 2026 it was raw compute, which is precisely what AI training and inference consume.

What makes the bet fundable rather than merely large is how a chunk of the hardware is being paid for. Management disclosed that most of the third and fourth quarter bookings increase came from large AI contracts in which the customer either prepaid for the GPUs or supplied them directly, and that those prepaid and customer-supplied portions now total 75 billion. Customer money arriving before Oracle's own money goes out is an unusual feature in a capacity build, and it lowers how much outside financing the same delivery schedule requires.

Beneath the growth sits an annuity most infrastructure competitors do not have. Oracle's 10-K notes that "Substantially all customers opt to purchase software support contracts when they purchase an Oracle software license." Software support is still the single largest revenue line in the company at roughly 29% of fiscal 2026 revenue, and it renews on a base of database installations that enterprises reorganize around rather than replace. Software revenue overall slipped 1% to 24.5 billion in fiscal 2026, which is the sound of a slow migration, not a collapse.

The combination shows up in the reported profit. Operating income was 20.6 billion dollars on 67.4 billion of revenue in the year ended May 31, 2026, an operating margin of 30.6%, and operating income grew 17%. That sits far above what CRM converts at just over 20 cents on the sales dollar, and far above what NOW converts at roughly 11 cents, though it remains well under what MSFT manages. Oracle is running an AI capacity business on profitability that most of its application peers have never reached, and it is doing so while spending 10.3 billion a year on research and development.

Guidance puts a number on where this goes next. Management confirmed a fiscal 2027 revenue target of 90 billion, against 67.4 billion delivered in fiscal 2026. If the backlog converts anything like the schedule the filing lays out, the growth the price needs is not a hope. It is a delivery problem.

Bear Case

Follow the funding rather than the bookings. In fiscal 2026 Oracle spent 55.7 billion dollars on property and equipment while operations threw off 32.0 billion, and the company reported free cash flow of negative 23.7 billion for the year. It filled that hole, paid 5.8 billion of common dividends, and kept building, by raising 43 billion in debt and 5 billion in equity during the same year. For fiscal 2027 management expects to raise roughly 40 billion more, including a 20 billion at-the-market common stock program whose prospectus supplement was filed on June 23, 2026. A shareholder reading that sentence is reading their own dilution schedule.

The evidence of who is being asked to pay is already in the share count. Diluted shares went from 2,823 million in fiscal 2024 to 2,866 million in fiscal 2025 to 2,914 million in fiscal 2026, and repurchases fell from 1,202 million dollars two years ago to 95 million in fiscal 2026. Buybacks were not paused for a quarter; they were effectively switched off while the dividend was maintained and a mandatory convertible preferred was added to the capital structure, listed as a separate NYSE line. Mandatory convertibles do exactly what the name says. They arrive as preferred and leave as common.

The borrowing is not modest either. Notes payable stood at 129.5 billion dollars on May 31, 2026, split 7.2 billion current and 122.3 billion long term, against 92.6 billion a year earlier, with 31.3 billion of cash and equivalents on the other side. On top of that sit 41.9 billion of undiscounted operating lease payments, plus further leases the company says are "generally expected to commence between the first quarter of fiscal 2027 and fiscal 2029 and for terms of fifteen to nineteen years that were not reflected on our consolidated balance sheet as of May 31, 2026". Interest expense was 4.6 billion in fiscal 2026, up from 3.6 billion, and the operating profit covered it a little over four times over. That is comfortable today. It is comfortable because the assets bought with the borrowing have not yet been asked to earn anything.

Oracle names the specific failure mode itself. Its risk factors warn that "we could be locked into multi-year commitments for excess data center space and related capital expenditures, as well as associated financings, without receiving corresponding revenue." The mismatch is structural: the leases run fifteen to nineteen years, and the filing separately notes that lease terms and pricing "typically do not align with the duration and pricing of customer" contracts. A ratings action would tighten the same screw from the other side. The company warns that a downgrade "could also reduce our access to, or increase the cost of, commercial paper or other short-term financing, affect the terms or availability of certain long-term commitments (including data center leases), limit eligibility to contract with certain customers".

Now connect that to what the price is asking for. Today's price requires company-wide operating profit to compound at roughly a mid-teens pace for about half a decade. Oracle delivered 17% operating profit growth in fiscal 2026, so the rate is not exotic. The persistence is. Of comparable fast growers, only about half have sustained that pace over a stretch that long. And the concentration inside the backlog is not diversified demand: management attributes most of the increase to large AI contracts, which means a small number of counterparties whose own capital plans decide whether the contracted revenue actually arrives. The 10-K puts the operational version of that plainly: "If our cloud infrastructure buildout takes longer than expected, our cloud revenue forecasts will be affected."

The bull is right that the backlog is real. The bear's point is narrower and harder to argue away. Book-value and current-earnings-power methods land at roughly a third of today's price, which means the price already credits the conversion. If mid-teens growth slips toward the high single digits, there is no static support underneath to catch it, and the equity issuance schedule keeps running regardless.

Valuation

Start with what the market is underwriting. Today's price pays for company-wide operating profit to compound at roughly a mid-teens rate and to keep doing it for about half a decade, on a business that delivered 17% operating profit growth in the year ended May 31, 2026. Against Oracle's own recent record the required pace is unremarkable. The demand is for duration, not for a step change.

That distinction matters because the historical record on duration is thin. Among companies that have grown at this pace, only about half sustained it across a comparable stretch. Set against its own peer group the multiple Oracle carries sits in the lower half of the range, which is the part of the picture that argues the price is not obviously stretched.

The methods used to triangulate the business split cleanly, and the split is the information. Peer-multiple approaches and the forward cash-flow approaches both reach today's price. The asset-value approaches and the earnings-power approaches do not come close: the price sits about 2.7 times above where each of those families lands. That is a coherent pattern rather than a contradiction. Book value plus current profitability describes a company whose assets are largely already installed and earning; Oracle's assets are largely still being installed. The premium is the market paying for a buildout to become an earning base, and the static approaches structurally cannot frame that.

The build itself is where a reader should apply pressure, because it is filing-sourced rather than modeled. Purchases of property and equipment were 55.7 billion dollars in fiscal 2026 against 32.0 billion of operating inflows. The annual report says the direction continues: "we expect this trend to continue during fiscal 2027 and in the next few fiscal years as we increase our existing data center capacity and establish data centers in new geographic locations in order to meet current and expected customer demand." Revenue recognition follows installation, so the profit that has to justify today's price is on the far side of spending that has already happened.

Segment economics explain why the blended read is hard to place. Cloud infrastructure reached 18.1 billion in fiscal 2026 growing 77%, cloud applications 15.9 billion growing 11%, and software revenue slipped 1% to 24.5 billion. Those are three different businesses with three different peer sets. The support annuity behaves like IBM's installed base; the infrastructure line behaves like nothing in the cohort, because no peer in it grew a line of that size at that rate.

The balance sheet is what bounds the downside, and it has moved. Notes payable reached 129.5 billion dollars at the fiscal year end against 92.6 billion twelve months earlier, with 31.3 billion of cash and equivalents. Interest expense of 4.6 billion was covered a little over four times by operating profit. The common dividend was set at 0.50 dollars a share for the July 2026 payment, and dividends absorbed 5.8 billion during fiscal 2026. None of that is fragile. All of it is committed, and it is committed against a capacity plan whose returns are still in the backlog rather than in the income statement.

What the buyer gets, then, is a delivery schedule. Roughly 12% of a 638 billion dollar contracted book is scheduled to become revenue over the twelve months following the May 2026 year end, and the fiscal 2027 revenue target of 90 billion is the same claim stated forward. Every number in the growth case ties back to whether that conversion lands on time.

Catalysts

Oracle closed fiscal 2026 on June 10, 2026 with quarterly revenue of 19.2 billion, up 21%, and cloud revenue of 9.9 billion, up 47%, with cloud infrastructure alone up 93% in the quarter. The headline of that release was not the quarter, though. Bookings rose 85 billion sequentially, from 553 billion to 638 billion, and management attributed most of the third and fourth quarter increase to large AI contracts in which customers prepaid for GPUs or supplied the hardware themselves.

Two forward markers sit in the same release. Management confirmed a fiscal 2027 revenue target of 90 billion, and guided first-quarter fiscal 2027 revenue growth of 27% to 29% with cloud revenue growth of 58% to 64% in USD. The next scheduled test of both is the fiscal 2027 first-quarter report, which covers the quarter ending August 31, 2026.

The financing calendar is the other thing worth tracking, and it is unusually specific. Oracle said it expects to raise roughly 40 billion in fiscal 2027 through a mix of debt and equity, including the previously announced 20 billion at-the-market common stock issuance, and that it does not expect to issue additional debt in calendar 2026. The prospectus supplement for that equity program, adding fifteen further sales agents, was filed on June 23, 2026. How much of the 40 billion arrives as stock rather than bonds is a decision that lands directly on existing holders, and the filings will show it as it happens.

Peer Cohorts (Per Segment, With Filing Citations)

Cloud and license (reported)

• MSFT (MICROSOFT CORPORATION)
• FY2025 10-K: …obligations. Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities. Nature of Products and Services Licenses for on-premises software provide the customer with a right to use the software as it exists when made available…
• FY2025 10-K: …These volume licensing programs have varying programmatic requirements and benefits to best meet the needs of our customers. Software Assurance ("SA") conveys rights to new software and upgrades for perpetual licenses released over the contract period. It also provides support, tools, training, and other licensing…
• CRM (Salesforce, Inc.)
• FY2025 10-K: …strategies evolve, the Company may modify its pricing practices in the future, which could result in changes to SSP. In certain cases, the Company is able to establish SSP based on observable prices of products or services sold or priced separately in comparable circumstances to similar customers. The Company uses a…
• FY2025 10-K: . Revenues from term software licenses are generally recognized 66 Table of Contents at the point in time when the software is made available to the customer. Revenue from software support and updates is recognized as the support and updates are provided, which is generally ratably over the contract term. The Company…
• SAP (SAP SE)
• FY2025 20-F: …Revenue We derive our revenue from fees charged to our customers for the use of our cloud offerings, for licenses to our on-premise software products, and for standardized and premium support services, consulting, customer-specific software developments, training, and other services. Cloud and software revenue , as…
• FY2025 20-F: …We use cloud revenue, cloud and software revenue, current cloud backlog (CCB), and total revenue to measure our progress toward our growth targets. Cloud revenue comprises the main revenues of our cloud business and is derived from fees earned from providing customers with software as a service (SaaS), platform as a…
• NOW (ServiceNow, Inc.)
• FY2025 10-K: …and KPMG, among others, continue to help us expand our business by offering ServiceNow solutions to their customers. 16 Table of Contents Part I Our Technology and Operations We operate a multi-instance architecture that provides each customer with a dedicated application layer and database. This architecture is…
• FY2025 10-K: …subscription term. For our cloud services, we recognize subscription revenues ratably over the contract term beginning on the commencement date of each contract, the date we make our services available to our customers. Our contracts with customers typically include a fixed amount of consideration and are generally…
• WDAY (Workday, Inc.)
• FY2025 10-K: …providers of financial management and HCM applications, which have long-standing relationships with customers and partners. Some customers may be hesitant to switch vendors or to adopt cloud applications such as ours and may prefer to maintain their existing relationships with competitors. We also face competition…
• FY2025 10-K: …actors, to copy or reverse engineer our applications, including with the assistance of insiders, and use information that we regard as proprietary to create products and services that compete with ours. Some license provisions protecting against unauthorized use, copying, transfer, and disclosure of our technology…
• SNOW (SNOWFLAKE INC.)
• FY2025 10-K: …on public cloud providers, such as AWS, Azure, and GCP, and any availability interruption in the public cloud could result in us not meeting our service-level commitments to our customers. In some cases, we may not have a contractual right with our public cloud providers that compensates us for any losses due to…
• FY2025 10-K: …competitive and rapidly evolving. With the introduction of new technologies and innovations, we expect the competitive environment to remain intense. Our competition includes the following: • large, well-established, public cloud providers that generally compete in all of our markets, including Amazon Web Services…
• IBM (INTERNATIONAL BUSINESS MACHINES CORP)
• FY2025 10-K: …when the usage occurs. Proprietary term licenses often have a one-month contract term due to client termination rights, in which case, revenue would be recognized in that month for both the license and PCS. Clients may contract to convert their existing IBM term license software into perpetual license software plus…
• FY2025 10-K: …leases is recognized on a straight-line basis over the term of the rental or lease. Revenue from as-a-Service arrangements is recognized either on a straight-line basis or on a usage basis as described in the Services section above. Installation services are accounted for as distinct performance obligations with…
• AMZN (AMAZON COM INC)
• FY2025 10-K: …North America and International fulfillment networks that we operate; co-sourced and outsourced arrangements in certain countries; digital delivery; and through our physical stores. We operate customer service centers globally, which are supplemented by co-sourced arrangements. See Item 2 of Part I, "Properties."…
• FY2025 10-K: …factors for our seller and enterprise services include the quality, speed, and reliability of our services and tools, as well as customers' ability and willingness to change business practices. Some of our current and potential competitors have greater resources, longer histories, more customers, greater brand…

Hardware (reported)

• DELL (Dell Technologies Inc.)
• FY2025 10-K: …and support and deployment. Approximately 60% of ISG revenue is generated by sales to customers in the Americas, with the remaining portion derived from sales to customers in the Europe, Middle East, and Africa region ("EMEA") and the Asia-Pacific and Japan region ("APJ"). • Client Solutions Group ("CSG") - CSG…
• FY2025 10-K: Company's measure of segment revenue and segment operating income for management reporting purposes excludes Corporate and other, amortization of intangible assets, stock-based compensation expense, and other corporate expenses, as applicable, which are not used in evaluating the results of, or in allocating resources…
• HPE (HEWLETT PACKARD ENTERPRISE COMPANY)
• FY2025 10-K: …to remain, high with such changes in trade policies. We have been experiencing higher-than-normal inventory levels, primarily due to frequent component part updates, customers transitioning to the next generation of GPUs, our securing supply ahead of demand, and longer customer acceptance timelines on AI-related…
• FY2025 10-K: …integrated systems co-engineered with Nvidia that integrate HPE AI hardware and software technologies with Nvidia technologies to radically increase time to value of generative AI ("GenAI") capabilities optimized for inferencing, retrieval augmented generation, and model fine-tuning. We have expanded our cloud…
• HPQ (HP INC.)
• FY2025 10-K: , Lenovo Group Limited, Logitech International S.A., Microsoft Corporation, Samsung Electronics Co., Ltd., and Toshiba Corporation. In certain geographies, we also experience competition from local companies and from generically-branded or "white box" manufacturers. Our competitive advantages include our broad product…
• FY2025 10-K: …customer loyalty and legal compliance could be adversely impacted by a supplier's improper practices or failure to comply with our requirements for responsible practices and sourcing, including sub-tier sourcing. • Single-source suppliers. We obtain a significant number of components from a single source due to…
• NTAP (NetApp, Inc.)
• FY2025 10-K: …high-capacity data storage devices powered by NetApp ONTAP. NetApp FAS Storage Arrays provide customers with a balance of performance and capacity running disk drives or hybrid-flash configurations. FAS systems are suitable for secondary storage targets for disaster recovery, backup, and tiering. 7 NetApp E/EF series…
• FY2025 10-K: …the restoration or increase in that newly established basis. In addition, we record a liability for firm, non-cancelable and unconditional purchase commitments with contract manufacturers and suppliers for quantities in excess of our future demand forecasts consistent with our valuation of excess and obsolete…
• SMCI (SUPER MICRO COMPUTER, INC.)
• FY2025 10-K: …the products and then sell those products to us. We and Compuware frequently review and negotiate the prices of the power supplies we purchase from Compuware. SMCI | 2025 Form 10-K | 99 Table of Content s SUPER MICRO COMPUTER, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Compuware also manufactures…
• FY2025 10-K: …We design, build, test, validate, and deliver complete rack scale solutions for liquid-cooled direct-to-chip cold plate solutions for CPUs, GPUs, and memory. In addition, we manufacture the sophisticated management systems -- Cooling Distribution Units, Cooling Distribution Manifolds -- to regulate system…
• IBM (INTERNATIONAL BUSINESS MACHINES CORP)
• FY2025 10-K: …leases is recognized on a straight-line basis over the term of the rental or lease. Revenue from as-a-Service arrangements is recognized either on a straight-line basis or on a usage basis as described in the Services section above. Installation services are accounted for as distinct performance obligations with…
• FY2025 10-K: …to note E, "Acquisitions & Divestitures," for additional information. Table of Contents Notes to the Consolidated Financial Statements International Business Machines Corporation and Subsidiary Companies 67 Other Reportable Segment Items To ensure the efficient use of the company's space and equipment, several…

Services (reported)

• ACN (Accenture plc)
• FY2025 10-K: …and industry organizations and associations Human and social services agencies; defense departments and military forces; public safety authorities, including justice departments; educational institutions; non-profit organizations; cities; transportation agencies; and postal, customs, revenue and tax agencies Our work…
• FY2025 10-K: …entertainment, sports, content producers (including studios), content aggregators and streaming live events (sports) and media infrastructure providers, integrated advertising agencies and creative Enterprise technology, hardware, and associated manufacturing; semiconductor including silicon design and development,…
• CTSH (COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION)
• FY2025 10-K: …are: • AI and analytics, which helps clients identify and adopt the best AI use cases for their enterprise and formulate actionable insights from unstructured data to drive a greater understanding of their customers and operations; • Cloud and infrastructure, which helps simplify and modernize IT environments,…
• FY2025 10-K: …companies. Demand in this segment is driven by our clients' need for services related to AI adoption, modernization of business and technology operations, development of agentic ecosystems for the generation of new revenue streams, enhancing user experiences and driving operational efficiency. In response to this…
• IBM (INTERNATIONAL BUSINESS MACHINES CORP)
• FY2025 10-K: …Strategy and Technology and Intelligent Operations reported within the Consulting segment, and Infrastructure Support reported within the Infrastructure segment. Many of these services can be delivered entirely or partially through cloud or as-a-Service delivery models. The company's services are provided on a…
• FY2025 10-K: …supports clients' mission-critical, on-premise workloads in industries such as banking, airlines and retail. This includes transaction processing software such as Customer Information Control System and storage software, analytics and integration software running on IBM operating systems, AI assistants for IBM Z, and…
• EPAM (EPAM SYSTEMS, INC.)
• FY2025 10-K: …for modern platforms including web media streaming, mobile information delivery, print to digital transformations and information discovery and search. Our solutions aid our clients in developing new revenue sources, accelerating content management, delivery and monetization, and reaching broader audiences. We serve…
• FY2025 10-K: …license is transferred to the client. Revenues from licenses which do not have stand-alone functionality are recognized over time. If there is an uncertainty about the receipt of payment for the services, revenue recognition is deferred until the uncertainty is sufficiently resolved. The Company applies a practical…
• DXC (DXC Technology Co)
• FY2025 10-K: …that modernize operations and drive innovation across our customers' entire IT estate. DXC was formed on April 1, 2017 by the merger of CSC and HPES (the "HPES Merger"). Segments and Services Global Business Services GBS provides innovative technology solutions that help our customers address key business challenges…
• FY2025 10-K: …deep industry expertise to support the full spectrum of insurance operations. We also help operate and continuously improve bank cards, payment and lending processes and operations, and customer experience operations. 3 Global Infrastructure Services GIS implements and operates the technology underpinning the…
• WIT (WIPRO LIMITED)
• (no filing in the citation store)

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.