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Yahoo
4 days ago
- Business
- Yahoo
Should Investors Hold or Fold Oracle Stock at a P/E Multiple of 36.7X?
Oracle ORCL stands at a critical juncture as its stock trades at a price-to-earnings multiple of 36.7 times, significantly above its historical average of 26.8 times over the past decade, and the Zacks Computer-Software industry average of 35.32x. While the software giant's aggressive pivot to cloud infrastructure and AI has driven impressive growth, the elevated valuation raises important questions for investors contemplating their next move in 2025. Cloud Momentum Versus Rich Valuation The company's transformation from traditional database software to a cloud infrastructure provider has yielded remarkable results. Oracle reported fiscal 2025 fourth-quarter revenues of $15.9 billion, representing an 11% year-over-year increase, with cloud infrastructure revenues surging 52% to $3 billion. CEO Safra Catz projects even more aggressive expansion ahead, forecasting cloud infrastructure growth to accelerate from 50% in fiscal 2025 to more than 70% in fiscal 2026. This momentum has attracted major clients, including Meta and Chinese retailer Temu, while partnerships with the Cleveland Clinic and the UAE's G42 for AI healthcare platforms demonstrate Oracle's expanding reach beyond traditional enterprise Zacks Consensus Estimate for fiscal 2026 revenues is currently pegged at $66.6 billion, suggesting growth of 16.02% from the year-ago quarter's reported figure. The consensus mark for fiscal 2026 earnings is pegged at $6.73 per share, up 0.1% over the past 30 days. Oracle Corporation Price and Consensus Oracle Corporation price-consensus-chart | Oracle Corporation Quote The company's involvement in the high-profile Stargate AI infrastructure initiative alongside OpenAI and SoftBank further validates its strategic positioning in the artificial intelligence revolution. Oracle plans to invest more than $25 billion in capital expenditures in fiscal 2026, more than triple its fiscal 2024 spending of $7 billion, reflecting management's confidence in sustained these growth catalysts, Oracle's current valuation presents a compelling case for patience. The stock's forward P/E ratio has expanded dramatically from its recent lows, now trading at levels not seen since the dot-com era. At 36.7 times earnings, Oracle commands a premium valuation that exceeds the sector average by a considerable margin. This elevated multiple leaves little room for error, particularly if growth rates fail to meet management's ambitious projections or if broader market conditions deteriorate. ORCL's P/E Ratio F12M Ratio Depicts Premium Valuation Image Source: Zacks Investment Research Cloud Market Competition and Stock Performance Oracle faces formidable competition in the cloud infrastructure market, where Amazon's AMZN AWS commands 30% market share, Microsoft's MSFT Azure holds 20% and Alphabet GOOGL-owned Google Cloud captures 13% in second-quarter 2025, per recent data from Amazon continues dominating through AWS scale advantages, Microsoft benefits from seamless enterprise integration, and Google leverages AI expertise, Oracle differentiates through competitive pricing and superior database integration. The company's recent partnerships with OpenAI and involvement in high-profile projects suggest that Oracle can carve a profitable niche despite trailing Amazon, Microsoft, and Google in absolute market of Oracle have gained 52.3% so far this year, outperforming the Zacks Computer and Technology sector's growth of 14.6%. Shares of Microsoft, Google and Amazon have returned 25.6%, 7.4% and 0.9% year to date, respectively. Year-to-Date Performance Image Source: Zacks Investment Research Strategic Position for Patient Investors For existing shareholders, holding Oracle stock appears prudent given the company's strong competitive position and robust growth trajectory. The recent 25% dividend increase to 50 cents per share quarterly provides additional income while investors wait for the growth story to unfold. The company's remaining performance obligations of $138 billion offer substantial revenue visibility, supporting the long-term investment new investors might benefit from exercising patience. Oracle's fiscal third-quarter results in March 2025 disappointed investors when the company missed analyst expectations, demonstrating that execution risks remain despite favorable long-term trends. The stock's poor year-to-date performance suggests market participants are already recalibrating combination of accelerating cloud growth, strategic AI partnerships, and massive infrastructure investments positions Oracle well for the future. Yet at current valuations, the stock offers a limited margin of safety. Investors should monitor upcoming quarterly results closely, particularly cloud infrastructure metrics and cash flow generation, to assess whether the premium valuation remains justified. For now, existing shareholders should maintain positions while prospective buyers await more favorable entry points that better balance Oracle's undeniable growth potential with valuation discipline. Oracle currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Inc. (AMZN) : Free Stock Analysis Report Microsoft Corporation (MSFT) : Free Stock Analysis Report Oracle Corporation (ORCL) : Free Stock Analysis Report Alphabet Inc. (GOOGL) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research
Yahoo
06-06-2025
- Business
- Yahoo
Should You Buy, Sell or Hold Oracle Stock Before Q4 Earnings?
Oracle ORCL is scheduled to report its fiscal fourth-quarter 2025 results on June the fourth quarter of fiscal 2025, total revenues are expected to grow in the band of 9-11% at constant currency (cc) and between 8% and 10% in dollar Zacks Consensus Estimate for revenues is currently pegged at $15.54 billion, suggesting growth of 8.8% from the year-ago quarter's reported company's non-GAAP EPS is expected to grow 0% to 2% and be in the range of $1.62-$1.66 at cc and between $1.61 and $1.65 in consensus mark for earnings is pegged at $1.64 per share, unchanged over the past 30 days. The figure indicates 0.61% growth from the year-ago period. Image Source: Zacks Investment Research In the last reported quarter, Oracle delivered a negative earnings surprise of 0.68%. Markedly, the company's earnings missed the Zacks Consensus Estimate in three of the trailing four quarters, while beating the same once, the average being 0.83%. Oracle Corporation price-eps-surprise | Oracle Corporation Quote (Find the latest earnings estimates and surprises on Zacks Earnings Calendar.) Our proven model does not conclusively predict an earnings beat for Oracle this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP has an Earnings ESP of 0.00% and a Zacks Rank #3 at present. You can see the complete list of today's Zacks #1 Rank stocks here. As Oracle approaches the fourth-quarter earnings release, investors are weighing strong cloud momentum against recent execution challenges. The database giant's fiscal third-quarter results demonstrated robust demand fundamentals, with remaining performance obligations reaching $130 billion. However, the company missed both earnings and revenue expectations, raising questions about near-term fiscal fourth quarter is likely to have benefited from Oracle's aggressive cloud infrastructure expansion and strategic partnerships. The company's collaboration with Alphabet GOOGL-owned Google Cloud, announced in April, expanded Oracle Database services across additional regions and introduced new partner programs. Similarly, the general availability of Oracle Exadata Database Service on Oracle Database@Azure in March positioned the company to capture multi-cloud database workloads. These partnerships with Google and Microsoft MSFT addressed a key growth constraint by extending Oracle's reach beyond its native cloud AI initiatives gained traction throughout the quarter. The integration of NVIDIA NVDA AI Enterprise on Oracle Cloud Infrastructure in March strengthened the company's AI training capabilities, while new AI agent functionalities embedded within Oracle Textura Payment Management and other cloud applications enhanced product differentiation. The introduction of Oracle Energy and Water Data Exchange demonstrated the company's sector-specific AI solutions, potentially driving adoption in vertical capacity constraints that hindered fiscal third-quarter growth may have persisted in the quarter under review, potentially limiting revenue conversion despite strong booking activity. Shares of ORCL have declined 10.1% in the past six months compared with the Zacks Computer and Technology sector's 1.2% decrease. Image Source: Zacks Investment Research While Oracle has a strong foothold in the database management and ERP software markets, its competitors are making significant inroads in the cloud space. AWS, Google Cloud and Microsoft Azure combined accounted for a whopping 63% of total enterprise spending on cloud infrastructure services during the first quarter of 2025, according to new data from IT market research firm Synergy. Oracle has also underperformed its cloud peers in the past six-month is also important to consider whether the stock's current valuation accurately reflects the company's long-term growth potential and ability to navigate the competitive is trading at a premium with a price/book of 27.73X compared with the Zacks Computer-Software industry's 8.89X, reflecting a stretched valuation. Image Source: Zacks Investment Research Oracle's investment proposition presents a balanced risk-reward scenario ahead of fourth-quarter fiscal 2025 results. The company demonstrates compelling long-term fundamentals through its $130 billion remaining performance obligations, strategic AI initiatives, and expanding multi-cloud partnerships with Google and Microsoft. However, recent execution challenges, including third-quarter earnings and revenue misses, coupled with persistent capacity constraints, suggest near-term volatility. Oracle's premium valuation relative to cloud peers adds downside risk if growth acceleration fails to materialize. While the company's database franchise and AI positioning provide competitive advantages, investors should maintain current holdings while monitoring operational improvements before significantly increasing exposure. Oracle presents a balanced investment opportunity with strong fundamentals offset by execution uncertainties. The company's substantial cloud backlog and AI positioning support long-term growth prospects, yet recent performance volatility and premium valuation warrant caution. Current shareholders should maintain their positions, while prospective investors may benefit from waiting for improved operational clarity or more attractive entry points following fourth-quarter results. The fiscal fourth-quarter results will likely determine whether Oracle can translate its substantial backlog into consistent revenue acceleration. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Microsoft Corporation (MSFT) : Free Stock Analysis Report NVIDIA Corporation (NVDA) : Free Stock Analysis Report Oracle Corporation (ORCL) : Free Stock Analysis Report Alphabet Inc. (GOOGL) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research
