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BofA Securities raised its price target on Oracle (NYSE:ORCL) to $220.00 from $156.00 on Thursday, while maintaining a Neutral rating on the stock following the company’s fourth-quarter earnings report and fiscal year 2026 outlook. According to InvestingPro data, Oracle’s stock is currently trading at elevated multiples, with a P/E ratio of 40.4x and strong momentum, having delivered a 27% return over the past year.
Oracle reported total cloud subscription growth of 27% in the fourth quarter, exceeding BofA’s expectation of 26%. The outperformance was primarily driven by the company’s Software (ETR:SOWGn) as a Service (SaaS) business, which grew 14% year-over-year, accelerating from 10% in the third quarter and aligning with growth rates of Oracle’s application software peers. The company maintains impressive profitability with a gross margin of 71.1% and generated revenue of $55.8 billion in the last twelve months.
Oracle Cloud Infrastructure (OCI) growth reached 52%, slightly below BofA’s projection of 58% but still showing acceleration from 51% in the previous quarter. The analyst noted this performance in the infrastructure and platform segment was "somewhat disappointing" despite the sequential improvement.
For fiscal year 2026, Oracle plans to significantly increase capital expenditures to $25 billion, representing 37% of revenue, up from BofA’s previous estimate of $18 billion. This substantial increase in spending reflects Oracle’s efforts to meet growing infrastructure demand, particularly related to cloud and artificial intelligence initiatives.
BofA projects Oracle’s fiscal 2026 operating margin will be 41.6%, down from the company’s initial target of 45% set during its 2023 analyst day, with the decline attributed to increased capital expenditures and higher cost of sales resulting from the company’s shift toward cloud and AI offerings.
In other recent news, Oracle reported fourth-quarter revenue of $15.9 billion, marking an 11% year-over-year increase and surpassing expectations. The company’s cloud business showed significant growth, with cloud infrastructure revenue increasing by 62% and total cloud revenue rising by 27% in constant currency. Oracle has set fiscal year 2026 revenue guidance at $67 billion, representing a 16% growth in constant currency, with expectations for cloud infrastructure revenue to grow over 70%. Analysts from firms like Wolfe Research, Evercore ISI, and Jefferies have raised their price targets for Oracle, citing strong financial performance and positive growth projections. Wolfe Research increased its target to $215, Evercore ISI to $215, and Jefferies to $220, each maintaining favorable ratings on the stock. Stifel also raised its price target to $180, noting the company’s solid pipeline and remaining performance obligation visibility. Oracle’s capital expenditure guidance for fiscal 2026 is set at $25 billion, which is notably higher than analyst expectations. While these developments indicate robust growth, analysts have noted potential challenges with operating margins and free cash flow.
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