Mizuho reiterates Oracle stock rating on cloud growth milestone

Oracle reported strong fiscal fourth-quarter results, achieving double-digit revenue growth for the first time in over a decade, driven by a 62% increase in Oracle Cloud Infrastructure (OCI) and 22% growth in Fusion Cloud ERP. The company's remaining performance obligations (RPO) surged 41% to $138 billion, and management projects 16% revenue growth for fiscal year 2026, with cloud revenue expected to grow by over 40%. Analysts have raised price targets, citing the robust RPO backlog, although concerns remain about capital intensity risks associated with Oracle's planned $25 billion cloud infrastructure expansion.

Analysis

Oracle (ORCL) has demonstrated a significant inflection point, achieving its first double-digit organic revenue growth in over a decade during its fiscal fourth quarter of 2025, with reported revenue of $15.9 billion, an 11% year-over-year increase that surpassed expectations. This performance was primarily propelled by robust momentum in its cloud offerings, evidenced by Oracle Cloud Infrastructure (OCI) growth accelerating to 62% YoY and Fusion Cloud ERP expanding by 22%. A key indicator of future revenue, Remaining Performance Obligations (RPO), surged 41% YoY to $138 billion, excluding contributions from the nascent Stargate initiative, with management anticipating RPO growth to exceed 100% in the next year. Building on this, Oracle issued strong guidance for fiscal year 2026, projecting 16% total revenue growth to $67 billion, an upward revision from previous forecasts, with cloud revenue expected to grow over 40% and cloud infrastructure revenue by more than 70%. Analyst sentiment is largely positive, with Mizuho reiterating an Outperform rating and a $180 price target, emphasizing Oracle's re-emergence as a double-digit growth entity. Piper Sandler also raised its price target to $190, citing the strong RPO, though maintained a Neutral rating due to concerns over capital intensity associated with Oracle's plan to invest over $25 billion in cloud infrastructure expansion in FY2026. This strategic capital deployment underscores Oracle's focus on integrating AI capabilities and scaling its infrastructure to meet accelerating cloud demand, marking a clear transformation from its historical 2% revenue CAGR (FY12-22). While the company's cloud and AI strategy execution appears effective, the article also notes that external AI-driven analyses, such as those from InvestingPro, suggest Oracle may not be among the most undervalued stocks, warranting a balanced perspective.

Key Decisions for Investors

• Investors should acknowledge Oracle's robust Q4 FY2025 performance and strong FY2026 guidance, particularly the accelerated growth in OCI and the substantial $138 billion RPO, as key indicators of its successful cloud transition and future revenue potential.
• It is crucial to monitor Oracle's execution on its significant capital expenditure plan, exceeding $25 billion for FY2026, as efficient deployment for cloud infrastructure is vital for sustained growth, while also considering the capital intensity risks highlighted by some analysts.
• Consider the current positive momentum and analyst price target upgrades alongside the Neutral rating from Piper Sandler and external observations on valuation, suggesting a thorough assessment of risk-reward given the aggressive growth strategy and associated investments.