Oracle Corporation

New York Stock Exchange
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Bullish +55

3 Reasons Why You Should Hold Oracle Stock Despite a 29.5% YTD Drop

📉 ORCL shares dropped 29.5% YTD amid investor anxiety over heavy capital deployment for AI data centers and increased debt obligations.

💰 Total cloud revenues hit $9.9 billion in Q4, with Cloud Infrastructure revenue surging 93% to $5.8 billion.

📜 Remaining Performance Obligations swelled to $638 billion, up 363% from a year ago, indicating secured future demand.

🚀 Fiscal 2027 guidance shows accelerating growth with total revenue expected to rise 27%-29% and cloud revenue growing 57%-63%.

💵 The board declared a quarterly cash dividend of $0.50 per share, payable July 24, 2026.

🤝 Customer-supplied hardware for major AI contracts now totals $75 billion, reducing the need for independent capital raising.

📈 Non-GAAP EPS guidance was raised to $8.05 for fiscal 2027, representing 18% growth after adjusting for one-time gains.

🧬 Multicloud AI Database business grew 404% in Q4, marking its fastest-growing offering ever.

🏥 Oracle Health is set to incorporate an AI-driven version of the Cerner patient care management system.

⚠️ The company recorded negative free cash flow of $23.7 billion in fiscal 2026 as capex outpaced operating cash flow.

📉 Software revenues declined slightly, highlighting the ongoing strategic shift away from legacy licensing models.

🏗️ Oracle plans to raise roughly $40 billion more in debt and equity during fiscal 2027 to fund expansion.

🌐 ORCL is expanding its multicloud footprint by making its database available across Amazon, Microsoft, and Google environments.

📊 The stock trades at a trailing P/E ratio of 22.64x, which is higher than the sector average but reflects growth expectations.

⚖️ Zacks Investment Research maintains a 'Hold' (Rank #3) rating, advising patience rather than aggressive buying.

Bullish Signals
  • Record demand evidenced by Remaining Performance Obligations swelling to $638 billion, up 363% from the prior year.
  • Cloud Infrastructure revenues surged 93% to $5.8 billion in the fourth quarter.
  • Accelerating fiscal 2027 guidance with total revenue growth projected between 27% and 29%.
  • Raised non-GAAP earnings-per-share guidance to $8.05 for fiscal 2027, representing 18% growth.
  • Customer-supplied hardware totaling $75 billion reduces the capital Oracle must independently raise.
  • Multicloud AI Database business grew 404% in Q4, described as the fastest-growing offering ever.
  • Health application suite integration with Cerner expected to push overall Oracle Health growth into double digits.
  • Declaration of a quarterly cash dividend of $0.50 per share signals confidence in underlying cash generation.
Risk Factors
  • Shares have tumbled roughly 29.5% year-to-date, underperforming the technology sector's appreciation.
  • Negative free cash flow of $23.7 billion in fiscal 2026 as capital investment outpaced operating cash flow.
  • Plans to raise roughly $40 billion more in debt and equity during fiscal 2027 increase financial leverage.
  • Software revenues declined slightly for the year, underscoring the ongoing shift away from legacy licensing.
  • Risks include the ability to secure sufficient data center capacity and source graphics processing units.
  • Complexity of managing large-scale government and enterprise contracts could affect revenue conversion.
  • Stock trades at a premium with a trailing P/E ratio of 22.64x, higher than the sector average.
Full Analysis
Oracle Corporation (ORCL) shares have declined approximately 29.5% year-to-date, underperforming the broader technology sector as investors express concern over the company's heavy capital expenditure requirements for AI data centers and its associated debt load. Despite this volatility, the company reported record demand in its fourth quarter of fiscal 2026, characterized by a massive contracted backlog that has grown significantly from the previous year. Key financial highlights include total cloud revenues reaching $9.9 billion, a surge in Cloud Infrastructure revenue of 93% to $5.8 billion, and a substantial increase in Remaining Performance Obligations (RPO) to $638 billion. The company also declared a quarterly cash dividend of 50 cents per share, signaling confidence in its cash generation capabilities even amidst aggressive expansion plans. Looking ahead to fiscal 2027, Oracle provided accelerating guidance with total revenue growth projected between 27% and 29%, and cloud revenue growth expected between 57% and 63%. The company reaffirmed a $90 billion total revenue target and raised its non-GAAP earnings-per-share guidance to $8.05, while noting that customer-supplied hardware now totals $75 billion, which helps offset independent capital raising needs. Beyond core infrastructure, Oracle is diversifying with a 404% growth in its Multicloud AI Database business and plans to integrate AI into its Health application suite. However, risks remain regarding negative free cash flow of $23.7 billion in the prior fiscal year, rising debt financing needs, and execution challenges in securing data center capacity and GPU supply.