Oracle's Strong Play in OCI and AI Integration: Analysts Echo Optimism on Achievable FY26 Targets

Goldman Sachs analyst Kash Rangan reiterated a Neutral rating on Oracle Corp ORCL and a $120 price target.

From Oracle's analyst meeting, Rangan flagged runway in Oracle Cloud Infrastructure (OCI) as Oracle highlighted a distinct price/performance advantage vs. Hyperscaler peers, visibility into durable low-to-mid teens SaaS revenue growth due to market leadership, and key innovations in its core database business. 

The management also reaffirmed FY26 guidance, including $65 billion in revenue and a 45% operating margin, where Rangan sees a viable path to realization given it leans heavily on Cloud execution. 

The analyst projects an FY24 revenue of $53.76 billion vs. consensus $53.69 billion and EPS of $5.57 vs. consensus $5.54.

Piper Sandler analyst Brent Bracelin reiterated Oracle with an Overweight and a $130 price target.

The meeting signaled a broadening investor appetite to understand AI's role in helping reshape Oracle's growth trajectory over the next 3-5 years. 

The disappointing Q2 outlook of 6% Y/Y might be short-lived with the reiteration of the FY26 and full-year FY24 target of 7%, including a 1% overall headwind from the Cerner cloud transition. 

Bracelin raised his estimates slightly to factor in underlying AI momentum and differentiated OCI capabilities, resonating with digital natives and AI innovators like Uber, TikTok, Zoom, Cohere, NVIDIA, and MosaicML. 

The analyst projects an FY24 revenue of $53.44 billion (prior $53.26 billion) and EPS of $5.61 (prior $5.50).

Stifel analyst Brad R. Reback had a Hold rating on Oracle. Management reiterated its FY26 targets. 

The organic revenue growth goal will require a step up from current levels to achieve a 9.2% CAGR over the next three years. The $15 billion in incremental revenue to get to their target would require ~4% of the $354 billion in cloud opportunities within apps and infrastructure the company identified, made up 23% from existing customer expansion & and 77% from new-logo options. 

The company is likely optimistically estimating competitive win rates resulting in share gain. He expects Oracle to benefit from secular AI/Cloud trends and drive operating leverage, most notably in Cerner as they transition it from a Service to an IP-based business.

Guggenheim analyst John DiFucci reiterated a Buy rating on Oracle with a price target of $150.

The analyst came away with greater confidence from the analyst meeting, rating ORCL as his Best Idea as the right call. While ORCL is not immune to the macro environment (no one is), it has several current and future offsetting factors that should enable it to achieve its reiterated FY26 guidance despite a prolonged period of macro softness. 

Oracle's three-legged stool of growth included the transition of on-premise applications to the Cloud, the development of OCI, and infrastructure on-premise support to the Cloud. 

In addition, new workloads to Oracle will likely move to OCI, whether infrastructure or applications, when the macro backdrop improves. 

The company reiterated its FY26 guidance and presented a logical means to getting there, which is reflected in DiFucci's model, though Street estimates are below this.

The analyst projects an FY24 revenue of $53.8 billion and EPS of $5.62.

Price Action: ORCL shares traded higher by 0.11% at $109.55 on the last check Friday.

Price Action: ORCL shares traded higher by 0.11% at $109.55 on the last check Friday.