Oracle (ORCL) Stock: Should You Buy the Dip After 11% Post-Earnings Drop?

Quick Overview

• Oracle delivered Q4 revenue of $19 billion, marking a 21% year-over-year increase, while cloud revenue soared 47% to approximately $10 billion.
• Shares declined 11% following the earnings announcement; Morningstar reduced its fair value assessment from $220 to $207.
• The company intends to invest $90–$95 billion in capital expenditures during FY2027, a significant jump from $56 billion in FY2026.
• BMO Capital increased its price target to $220 while maintaining an Outperform rating following the quarterly results.
• Management increased FY2027 adjusted EPS guidance to $8.05, reflecting an 18% gain, compared to Wall Street’s consensus of $8.01.

Oracle delivered impressive fourth-quarter results, yet Wall Street’s reaction was anything but enthusiastic. Following the June 10 earnings report, shares tumbled 11% as market participants grappled with the implications of an unprecedented $90–$95 billion capital spending program on future cash generation.

Oracle Corporation, ORCL

Quarterly revenue reached $19 billion, representing a 21% increase compared to the prior-year period. Cloud services emerged as the clear winner, advancing 47% to approach the $10 billion mark. Oracle Cloud Infrastructure, commonly known as OCI, expanded an impressive 77% year-over-year.

GPU capacity utilization throughout Oracle’s worldwide data center infrastructure reached 97.5% during the fourth quarter. Among those GPUs, 92% were retained by current customers, while new clients claimed the remaining 8% within a 90-day window.

The software giant activated over 1.2 gigawatts of data center capacity throughout fiscal 2026. Management indicated that the company’s largest infrastructure initiatives are tracking on schedule or exceeding timeline expectations.

The Capital Expenditure Challenge

While revenue performance exceeded expectations, investor attention quickly shifted to the company’s aggressive investment roadmap. Oracle invested $56 billion in capital expenditures during FY2026 and now anticipates that amount will balloon to $90–$95 billion in FY2027.

Morningstar’s analyst Luke Yang adjusted the fair value projection downward to $207 per share from the previous $220 estimate. The revision primarily reflected concerns that heightened CapEx requirements would compress future free cash flow generation.

The research firm maintained its three-star “fairly valued” assessment on Oracle shares. Morningstar highlighted that Oracle’s financial position will be stretched considerably, with approximately $30 billion in capital deployment expected to absorb the majority of operating cash generation.

The company’s financing strategy involves raising $20–$25 billion through customer advance payments, issuing $40 billion in combined debt and equity securities, and allocating the final $30 billion from operational cash flows.

Wall Street’s Mixed Response

Despite concerns from some analysts, others remain optimistic. BMO Capital’s Keith Bachman raised his price objective to $220 from $200 on June 11, keeping his Outperform recommendation intact. His thesis centers on anticipated earnings expansion in FY2027 as the company realizes operational efficiencies.

Oracle confirmed its FY2027 revenue projection of $90 billion while boosting its adjusted EPS forecast to $8.05, marking an 18% year-over-year improvement. Analyst consensus had previously called for EPS of $8.01 and revenue of $88.9 billion.

Management also reiterated its ambitious long-term objectives: revenue compound annual growth rate exceeding 31% and EPS CAGR surpassing 28% through fiscal 2030.

Morningstar’s analysis suggests cloud services will comprise approximately 85% of Oracle’s total revenue by FY2030, with OCI posting a five-year CAGR of 62%.

The substantial $90–$95 billion FY2027 capital investment program aims to deploy nearly 3 gigawatts of additional GPU cloud infrastructure, which Morningstar believes could generate over $30 billion in recurring annual revenue at full capacity.

Oracle’s strategic alliance with Bloom Energy was identified as a key factor in addressing immediate power availability challenges across its data center portfolio.

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