Oracle Corporation (ORCL): what the price requires

At today's price, Oracle Corporation (ORCL) is priced for +14.1% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-14 · Source: https://boothcheck.com/report/ORCL

Headline

FieldValue
TickerORCL
CompanyOracle Corporation
Current price$132.25/sh
CompositionCloud and license 86% / Hardware 5% / Services 9%

What The Price Requires (Inversion)

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

FieldValue
Inversion basiswhole-company
Operating margin needed11.7%
Operating margin today30.2%
Margin compression implied-18.5pp
Implied growth14.1%
Multiple paid22x operating income

The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.

Solve inputs: computed at a 8.6% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7.3pp.

How unusual the bet is: within-range

ReferenceValue
vs own history+0.89σ
cohort percentile (of 177 peers)38
sustained it ~5 years at this level52%
implied end-window share0%

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.

FamilyMedian price/FVModelsReads
Asset2.45x5expensive
Earnings2.47x3expensive
Relative0.71x5justifies
Growth0.72x3justifies

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 8.7%); the inversion above states its own rate.

Per-Model Detail (n=16)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$314.300.42xyesFCF base $34.2B, growth 17% (input: historical growth), terminal g 4.0%, WACC 8.7%, 6yr projection
DCF Exit MultipleGrowth$183.410.72xyesExit EV/EBITDA: 15.8x / 17.8x / 19.8x (bear / base = today's held flat / bull), 6yr
Relative ValuationRelative$195.580.68xyesP/E 35x (static sector reference · 2026-04), scenarios: 28.5x / 35.0x / 41.5x (bear / base = reference held flat / bull), EV/EBITDA 25x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$53.942.45xyesBV/sh $14.60, ROE (TTM) 34.2%, ke 9.3%
Two-Stage Excess ReturnAsset$110.071.20xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$120.851.09xyesRev $67.4B, growth 17% (input: historical growth; tapered), Terminal P/S: 4.7x / 5.7x / 6.8x (bear / base = today's held flat / bull, cap 12x)
Peter Lynch Fair ValueRelative$167.620.79xyesEPS $4.95, growth 34% (input: historical EPS growth), PEG=0.78 (Undervalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$42.293.13xyesNormalized EBIT (5y avg op income, one-time charges added back) $16.16B × (1−21%) / WACC 8.7% → EPV (no growth)
Residual IncomeAsset$83.801.58xyesBV $14.60 + 5yr PV of (ROE (TTM) 34.2% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham NumberAsset$40.343.28xyes√(22.5 × EPS $4.95 × BVPS $14.60) — Graham's conservative floor
EV/EBITDA RelativeRelative$186.410.71xyesEBITDA $21.96B × sector EV/EBITDA 25.0x
FCF YieldEarnings——no—
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings$159.870.83xyesEPS $4.95 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset$16.737.90xyesBV $14.60 × (ROIC 10.0% / WACC 8.7%)
P/Sales SectorRelative$185.050.71xyesRevenue $67.36B × sector P/S 8.0x
PEG Fair ValueRelative$185.790.71xyesEPS $4.95 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings YieldEarnings$53.562.47xyesEPS $4.95 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$33.0b
Net debt / NOPAT (after-tax)2.22x
Net debt / operating income (pre-tax)1.75x
Interest coverage4.6x
Share count CAGR (dilution)1.4%
Burning cashno

Bullet Takeaways

Bull Case

Start with what the market is paying for and then check it against the business. At $183.89 the price values Oracle at about 29x company-wide operating income, which works out to an embedded assumption of roughly 24.8% annual operating-profit growth sustained for five years. That is aggressive against Oracle's own multi-decade record. The reason a serious investor can still defend it is that the recent order book has stopped looking like a mature software company's. Remaining performance obligations reached $638 billion at the close of Q4 FY2026, up 363% year over year and up $85 billion sequentially (ERP Today). Revenue that has not yet been recognized at that scale is the closest thing a software model offers to a multi-year forward read, and it is what gives the growth assumption a footing the trailing record cannot provide.

The mix underneath the headline matters. Q4 FY2026 cloud infrastructure revenue grew 93% year over year to $5.8 billion, and management guided FY2027 total revenue up about 34% in constant currency to roughly $90 billion, with Q1 cloud revenue growth of 58% to 64% (Oracle press release). Oracle's filings frame this as a deliberate pivot. In fiscal 2025 it described total cloud and license-support growth led by the Americas, which contributed 75% of the constant-currency growth in that business (FY2025 10-K, accession 0000950170-25-087926). The infrastructure line is now the engine the model is being asked to pay for, and a 93% growth rate alongside a reported 97.5% GPU utilization rate argues the demand is real rather than speculative.

The valuation X-ray supports the optimistic read where it counts. The growth and relative families bracket the price: DCF Perpetual Growth lands at $195, DCF Exit Multiple at $204, Relative Valuation at $187, and EV/EBITDA Relative at $186, all within a few percent of where the stock trades. Against the segment cohort of ServiceNow, Intuit, and Shopify, Oracle is the one with a recognized hyperscale infrastructure backlog rather than a pure subscription book. ServiceNow recognizes its subscription revenue ratably over the contract term (NOW FY2025 10-K, accession 0001373715-26-000007), the same accounting that turns Oracle's $638 billion of obligations into a forward signal rather than a one-time number. If the cloud contracts convert at the rate the backlog implies, the price is defensible, not stretched.

Bear Case

The cleanest place to start the bear case is where the cash is going, because that is what the market reacted to. Oracle beat on Q4 FY2026 revenue and earnings and the stock still fell about 10% (INDmoney). The reason was the funding picture. FY2027 capex is guided at roughly $70 billion to build the data-center capacity behind the backlog. A company spending at that pace to chase contracts, many structured as customer-prepaid or bring-your-own-GPU deals, is converting a software balance sheet into a capital-intensive one. The market is right to ask who carries the financing risk if utilization or pricing slips.

The balance sheet is already feeling the strain. Oracle runs net debt of about $26 billion against gross debt near $65 billion, with interest coverage around 4.7x and a debt structure built on senior notes that rank pari passu with the commercial paper program and the revolving facility (FY2025 10-K, accession 0000950170-25-087926). Free cash flow is the pressure point the X-ray flags directly: the FCF Yield and SBC-adjusted FCF Yield models were both skipped because true free cash flow is non-positive once the build spend is counted. A growth bet financed partly with debt is fine while demand compounds. It is dangerous if the capex runs ahead of the revenue it is meant to capture.

The valuation methods that do not depend on the forward story are blunt about the gap. Earnings Power Value, which asks what the business is worth at current normalized operating earnings with no growth, lands at $46 against a $183.89 price. Simple Excess Return sits at $51, the Graham Number at $37, and ROIC-Justified P/B at $29. These are the conservative, balance-sheet-anchored reads, and they describe what Oracle is today rather than what it is promising to become. The implied 24.8% operating-growth assumption cleared only about 34% of comparable fast-growers when held five years. If conversion of the $638 billion backlog disappoints, or margins compress under the weight of the infrastructure build, the price has a long way to fall back toward the methods that ignore the promise.

Valuation

The valuation reads as a clean split between methods that price the cloud build and methods that ignore it. The average hides the real information, which is the dispersion. The growth family clusters near the price (DCF Perpetual Growth $195, DCF Exit Multiple $204, Discounted Future Market Cap $157), the relative family does too (Relative Valuation $187, EV/EBITDA Relative $186, P/Sales Sector $176), and the asset and earnings-power families sit far below it (Earnings Power Value $46, Simple Excess Return $51, Graham Number $37, ROIC-Justified P/B $29).

Inverting the price tells the same story from the other side. At today's level the market is underwriting roughly 24.8% annual operating-profit growth over five years, computed at an 8.8% cost of capital with 4% terminal growth, where each percentage point of cost of capital moves the implied growth by about 8.1 points. The current price sits above even the high end of that range, consistent with the elevated reading: the price is justified only if you accept the growth and peer-multiple families and dismiss the asset and earnings-power ones. Dividend models are out of the blend because the 1.1% yield falls below the inclusion threshold, and the free-cash-flow yield models drop out because reported free cash flow is non-positive while the build is underway.

Catalysts

Oracle reported Q4 and full-year FY2026 results on June 10, 2026, with total Q4 revenue of $19.2 billion (up 21%), total cloud revenue of $9.9 billion (up 47%), cloud infrastructure revenue of $5.8 billion (up 93%), and non-GAAP EPS of $2.11 (up 24%) (Oracle press release). Remaining performance obligations reached $638 billion, up 363% year over year, and management cited $67 billion of AI infrastructure contracts signed in the quarter with four customers each contracting more than $8 billion (ERP Today).

The forward calendar centers on whether the backlog converts and whether the spend behind it stays funded. FY2027 guidance is for total revenue up about 34% in constant currency to roughly $90 billion, with Q1 FY2027 cloud revenue growth guided at 58% to 64% and capex guided at about $70 billion (TIKR). The Q1 FY2027 print, due in September 2026, is the next test of whether OCI growth holds near the guided range. Three things are worth watching: the pace of RPO conversion into recognized revenue, gross GPU utilization (last reported at 97.5%), and how the capex is financed, since the 10% drop after a beat shows the market is now grading Oracle on cash deployment rather than top-line growth (INDmoney).

Peer Cohorts (Per Segment, With Filing Citations)

Cloud and license (reported)

Hardware (reported)

Services (reported)

Methodology Note

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.

View the full interactive ORCL report on boothcheck