Oracle (ORCL): Valuation in Focus as AI Bets Grow and Debt Strategy Shifts

Oracle’s aggressive investment in AI and cloud infrastructure, highlighted by massive deals with OpenAI, has sent its future revenue commitments soaring. At the same time, plans to take on additional debt have triggered investor concerns about profitability and long-term risk.

See our latest analysis for Oracle.

Oracle’s remarkable run earlier this year, fueled by multi-billion-dollar AI infrastructure contracts and surging demand, pushed the share price up 34% year-to-date and delivered a 22% one-year total shareholder return. But after a meteoric September, sentiment has sharply reversed as shares have dropped more than 23% in the last month and are now roughly 35% below their highs, as the market re-evaluates risks tied to mounting debt and lower-than-expected profit margins. Momentum has clearly faded, but with Oracle’s cloud business still expanding and multi-year contract backlogs at record levels, the long-term growth story remains alive, although much more hotly debated than before.

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With Oracle now trading well below its highs, the core question for investors is whether the recent selloff has created an attractive entry point or if concerns over debt and margins are already fully reflected in the price.

Most Popular Narrative: 35.2% Undervalued

Oracle’s share price sits far below the most widely followed fair value estimate, highlighting a notable gap between market sentiment and narrative expectations centered on major AI growth bets.

Surging demand for AI workloads, both training and especially inferencing, has positioned Oracle as a key provider for major AI companies (e.g., OpenAI, Meta, xAI, NVIDIA). This has driven a 359% year-over-year increase in remaining performance obligations and a robust acceleration in cloud infrastructure and database revenue. These factors support expectations for sustained double-digit revenue growth over multiple years.

Read the complete narrative.

Want to know the growth blueprint behind this high valuation? The key ingredient is rapid cloud revenue acceleration and a future profit multiple usually reserved for the industry’s elite. Intrigued by which bold numbers justify Oracle’s potential comeback? Dive deeper to discover the big assumptions fueling this narrative.

Result: Fair Value of $344.04 (UNDERVALUED)

Have a read of the narrative in full and understand what’s behind the forecasts.

However, this bullish narrative could quickly unravel if heavy capital spending fails to generate matching AI demand, or if cloud margins continue to face pressure.

Find out about the key risks to this Oracle narrative.

Build Your Own Oracle Narrative

If you want to dig into the numbers and challenge the consensus, you can put together your own Oracle story in just minutes, starting here: Do it your way

A great starting point for your Oracle research is our analysis highlighting 3 key rewards and 3 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your
financial situation. We aim to bring you long-term focused analysis driven by fundamental data.
Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Simply Wall St has no position in any stocks mentioned.

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