Key takeaways
View moreOracle's current valuation appears slightly overvalued based on its financial metrics and growth prospects. While the company shows strong profitability and growth in cloud services, its high debt levels and intense competition in the cloud market pose significant risks. The current stock price seems to be pricing in an optimistic scenario, which may not fully account for these risks and the challenges in sustaining high growth rates in a competitive environment.
- Oracle's strategic shift towards cloud services, particularly OCI, is driving revenue growth, with OCI revenue growing 51% year-over-year in Q3 FY25.
- The company's high debt-to-equity ratio of 575.47% as of 2025-02-28, significantly above the industry average, raises concerns about its long-term solvency.
- Oracle's negative free cash flow and negative working capital indicate potential liquidity challenges, requiring close monitoring of cash flow generation.
- Management is optimistic about future revenue growth, targeting $66 billion in FY26 and around 20% growth in FY27, driven by cloud services and AI demand.
- Oracle faces intense competition from large technology companies and regulatory risks, which could impact its financial performance and growth prospects.
- Oracle's Enterprise Value to EBITDA ratio of 23.40 as of 2025-02-28 is significantly lower than the industry average of 97.62, suggesting that the company may be undervalued relative to its earnings.
- Oracle's dividend was increased by 25% to $0.50 per share, signaling confidence in the company's future cash flow generation.
- While ORCL has shown strong performance over the long term (3 years), its recent performance has been less impressive, with underperformance in YTD, 3-month, and 6-month returns compared to peers like ServiceNow and Palo Alto Networks.
- Oracle's RPO reached $130 billion, a 63% increase year-over-year, providing a clear indication of future revenue growth and customer commitment to Oracle's cloud services.
Evaluation summary
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Company Overview:
- Oracle Corp. provides enterprise information technology (IT) products and services, including cloud-based and on-premise enterprise applications, infrastructure technologies, and related support services.
- Key offerings include Oracle Cloud Services (SaaS and IaaS), Oracle Database, Oracle Middleware, Oracle Applications, and Oracle Engineered Systems. The company serves businesses of all sizes, government agencies, educational institutions, and resellers globally through direct sales and indirect channels.
- The Cloud and License segment accounts for approximately 84-85% of total revenues, with cloud services revenues growing and offsetting declines in on-premise license sales, as noted in the SEC filings.
- Benchmarks used for comparative analysis include the Technology Select Sector SPDR Fund (XLK). Peers include ServiceNow, Inc. (NOW) and Palo Alto Networks, Inc. (PANW).
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Financial Performance:
- Oracle's sales/revenue has shown a moderate increasing trend over the last four quarters, from $13.31 billion in 2024-08-31 to $14.13 billion in 2025-02-28.
- Net income has fluctuated, ranging from $2.93 billion to $3.199 billion over the same period.
- The gross profit margin has remained relatively stable, ranging from 65.96% to 67.34%. However, the net profit margin has decreased from 22.00% in 2024-05-31 to 20.78% in 2025-02-28.
- Oracle's Return on Average Assets (ROA) has increased from 7.60% to 8.15%, Return on Average Total Equity (ROE) has increased from 214.11% to 108.79%, and Return on Average Total Capital has increased from 16.02% to 17.08% over the last four quarters.
- Compared to the industry average, Oracle's gross profit margin is significantly higher (66.43% vs. -52.57% as of 2025-02-28), but its net profit margin is also significantly higher (20.78% vs. -4919.34%). Oracle's ROA, ROE and ROIC are also significantly higher than the industry averages.
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Operational Efficiency:
- Oracle's total assets have increased from $140.98 billion in 2024-05-31 to $161.38 billion in 2025-02-28, while total liabilities have also increased from $131.74 billion to $144.12 billion.
- Working capital is negative, with a value of $493 million as of 2025-02-28.
- Net operating cash flow has been volatile, ranging from $1.30 billion to $7.43 billion over the last four quarters. Net investing cash flow has been consistently negative, driven by capital expenditure. Net financing cash flow has also been volatile, influenced by debt issuances and repayments.
- Free cash flow has been volatile, with a margin of 0.01% as of 2025-02-28.
- Total capital expenditure has increased from $2.80 billion in 2024-05-31 to $5.86 billion in 2025-02-28. Depreciation, depletion, and amortization have remained relatively stable, around $1.5 billion per quarter.
- Oracle has returned capital to shareholders through dividends, paying $1.12 billion in dividends in the quarter ending 2025-02-28. The dividend per share is $0.40. Oracle also repurchased nearly 1 million shares for $150 million, as mentioned in the Q3 FY25 earnings call.
- The current ratio has increased from 0.72 to 1.02, and the quick ratio has increased from 0.70 to 1.02 over the last four quarters, but both are still below the industry average of 2.88 and 2.84 respectively.
- The total debt to total equity ratio has decreased from 1085.35% to 575.47% over the last four quarters, but remains significantly higher than the industry average of 84.58%.
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Growth Opportunities:
- Oracle is focused on expanding its cloud services, particularly OCI, driven by AI demand. The Q3 FY25 earnings call highlighted OCI as the primary growth engine.
- The company is investing in R&D to enhance existing offerings and develop new cloud-based technologies, as noted in the SEC filings.
- Oracle is expanding its cloud regions, reaching 101 regions online, as mentioned in the Q3 FY25 earnings call.
- The company is also focused on multi-cloud strategies, partnering with other hyperscalers to expand its reach and capture database workloads.
- Oracle is developing a new AI data platform that enables customers to use the latest AI models to analyze data stored in their Oracle databases, as mentioned in the Q3 FY25 earnings call.
- Oracle's capital allocation strategies are aligned with its growth goals, with significant investments in R&D, cloud infrastructure, and acquisitions, as noted in the SEC filings.
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Recent Developments and Market Sentiment:
- The Q3 FY25 earnings call highlighted that OCI is the primary growth engine, driven by AI demand. Oracle's AI data platform and its focus on enabling customers to leverage AI models with their existing data suggest a substantial opportunity in AI inferencing.
- The rapid growth of multi-cloud database services indicates a successful strategy in partnering with other hyperscalers to expand Oracle's reach and capture database workloads.
- Oracle achieved its strongest booking quarter ever, adding $48 billion to its backlog, resulting in a total RPO of $130 billion, up 63% year-over-year.
- Oracle has reached a milestone with 101 cloud regions online, surpassing competitors in cloud region count due to the flexibility of its Gen 2 architecture.
- Oracle increased the quarterly dividend by 25% to $0.50 per share.
- Oracle reaffirmed its confidence in meeting its $66 billion revenue target for FY26 and expects FY27 growth to be around 20%.
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Risks and Threats:
- Oracle faces intense competition from large technology companies like Adobe, Alphabet, Amazon, Cisco, IBM, Microsoft, and Salesforce, as well as smaller specialized vendors, as noted in the SEC filings.
- Potential security breaches or data privacy issues with cloud-based offerings pose a risk, as highlighted in the SEC filings.
- The company relies on third-party manufacturing and supply chain partners, which could be disrupted.
- Oracle is exposed to foreign currency fluctuations and global economic/political instability, as noted in the SEC filings.
- Ongoing derivative lawsuits related to Oracle's acquisition of NetSuite and its cloud business disclosures, as well as a purported class action lawsuit in the Netherlands alleging GDPR violations, represent legal risks, as noted in the SEC filings.
- Oracle's high financial leverage, as indicated by the total debt to total equity ratio, poses a risk to its long-term solvency.
- The company's negative free cash flow raises concerns about its ability to fund future growth and shareholder returns.
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Valuation Analysis:
- Oracle's Enterprise Value to EBITDA ratio is 23.40 as of 2025-02-28, compared to an industry average of 97.62.
- Oracle's Enterprise Value to Sales ratio is 9.97 as of 2025-02-28, compared to an industry average of -19.94.
- Potential catalysts include continued growth in cloud services, successful integration of acquired technologies, and expansion into new markets.
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Price Performance:
- Oracle's stock price has fluctuated between $122.82 and $162.95 from 2025-03-27 to 2025-05-23.
- Over the past year, ORCL has significantly outperformed XLK, with returns of 26.69% versus 5.69%. However, in shorter time frames such as Year-To-Date, 3 Months, and 6 Months, ORCL has underperformed XLK.
- Compared to peers, ORCL has shown strong performance over the long term (3 years), but its recent performance has been less impressive, with underperformance in YTD, 3-month, and 6-month returns.
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Future Outlook:
- Oracle provided Q4 revenue growth guidance of 9-11% in constant currency and cloud revenue growth of 24-28% in constant currency, as mentioned in the Q3 FY25 earnings call.
- Management expressed confidence in achieving the FY26 revenue target of $66 billion and expects FY27 growth to be around 20%.
- Component delays impacting cloud capacity expansion are expected to ease in Q1 FY26.
- Oracle's future performance is expected to be driven by continued revenue growth in cloud services, particularly OCI, and efficient cost management.
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Summary:
- Oracle is strategically shifting towards cloud-based services, particularly OCI, which is driving revenue growth. The company is investing in R&D and expanding its cloud regions to support this growth.
- Oracle's financial performance is mixed, with increasing revenue but declining profitability metrics. The company's high debt-to-equity ratio and negative free cash flow raise solvency concerns.
- Oracle's operational efficiency is challenged by negative working capital and below-industry-average liquidity ratios.
- Oracle faces intense competition, regulatory risks, and potential legal liabilities.
- Oracle's valuation metrics are favorable compared to industry averages.
- Oracle's future outlook is positive, with management confident in achieving its revenue targets.
- SWOT Analysis:
- Strengths: Strong brand recognition, leading position in database software, growing cloud services business.
- Weaknesses: High debt levels, negative free cash flow, negative working capital.
- Opportunities: Expanding cloud services, AI-driven growth, multi-cloud strategies.
- Threats: Intense competition, regulatory risks, potential legal liabilities.
- Overall, Oracle's financial health is mixed, with strong revenue growth but significant financial leverage and liquidity challenges. The company's future performance depends on its ability to successfully execute its cloud strategy and manage its debt. Areas requiring further monitoring include free cash flow generation, debt repayment, and the impact of competition on pricing and margins. Oracle presents a growth-oriented investment profile balanced against identified risks.
Price history
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Fundamentals
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Insights
- Oracle's strategic shift towards cloud-based services is driving revenue growth and infrastructure investments, but also increasing long-term debt.
- The company's high financial leverage and negative free cash flow raise concerns about its long-term solvency and financial flexibility.
- While Oracle exhibits strong profitability compared to the industry, its liquidity position is weaker, as indicated by its lower current and quick ratios.
- The company's ability to generate free cash flow and manage its debt will be crucial for sustaining future growth and shareholder returns.
- Oracle's increasing capital expenditure reflects a growth-oriented investment strategy, but the returns on these investments should be closely monitored.
Analysis
- Revenue
- Sales/revenue has shown a moderate increasing trend, indicating steady growth in the company's top line.
- The company's revenue growth aligns with its strategic focus on cloud-based services, as highlighted in recent filings and earnings calls.
- The company's revenue growth is expected to be driven by continued investments in cloud infrastructure and potential acquisitions.
- Profitability
- The company's net profit margin and EBITDA margin are decreasing, suggesting potential challenges in maintaining profitability.
- The company's gross profit margin is greater than the industry average, indicating efficient production or service delivery.
- The company's profitability is expected to be influenced by macroeconomic factors such as inflation and exchange rates.
- Liquidity
- The company's current ratio and quick ratio are increasing, suggesting improved liquidity.
- The company's current ratio and quick ratio are lower than the industry average, indicating potential liquidity concerns.
- The company's liquidity is supported by operating cash flow, but negative free cash flow raises concerns about long-term solvency.
- Solvency
- The company's total debt to total equity ratio is decreasing, suggesting reduced financial leverage.
- The company's total debt to total equity ratio is significantly higher than the industry average, indicating high financial leverage.
- The company's debt/EBITDA is increasing, suggesting potential challenges in debt repayment.
- Operational Efficiency
- The company's return on average assets, return on average total equity, return on average total capital, and return on average invested capital are all increasing, suggesting improved operational efficiency.
- The company's return on average assets, return on average total equity, return on average total capital, and return on average invested capital are all higher than the industry average, indicating efficient asset utilization.
- The company's operational efficiency is expected to be influenced by strategic initiatives such as new product launches and market expansion.
- Cash Flow Analysis - The company's net operating cash flow has been volatile, influenced by changes in working capital and other factors. - The company's net investing cash flow has been consistently negative, due to high capital expenditure. - The company's net financing cash flow has been volatile, influenced by debt issuances and repayments.
- Risk Factors
- The company's high financial leverage, as indicated by the total debt to total equity ratio, poses a risk to its long-term solvency.
- The company's negative free cash flow raises concerns about its ability to fund future growth and shareholder returns.
- The company's volatile net operating cash flow and net financing cash flow indicate potential instability in its financial performance.
- Future Outlook
- The company's future performance is expected to be driven by continued revenue growth and efficient cost management.
- The company's ability to generate free cash flow will be crucial for debt repayment, dividend growth, and future investments.
- The company's strategic initiatives, such as new product launches and market expansion, are expected to influence its future earnings.
- Profitability
Financial statements
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Public filings
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- Oracle is transitioning its business model towards cloud-based enterprise applications and infrastructure, which is driving growth in its cloud services revenues but also requires significant ongoing investments in data centers and R&D.
- The company faces intense competition from large technology conglomerates as well as specialized cloud vendors, putting pressure on pricing and margins, particularly in its hardware and services businesses.
- Regulatory risks around data privacy and security, as well as potential legal liabilities from ongoing lawsuits, represent material threats that could impact Oracle's operations and financial performance.
- Oracle's strong cash flow generation and balance sheet provide financial flexibility to fund growth initiatives, shareholder returns, and debt management, but the company must carefully manage its capital allocation to navigate the evolving enterprise IT landscape.
Core Business and Operations:
- Oracle provides enterprise information technology (IT) products and services, including cloud-based and on-premise enterprise applications, infrastructure technologies, and related support services
- Key products/services include Oracle Cloud Services (SaaS and IaaS), Oracle Database, Oracle Middleware, Oracle Applications, Oracle Engineered Systems, and professional services
- Serves businesses of all sizes, government agencies, educational institutions, and resellers globally through direct sales and indirect channels
- Competes with large technology companies like Adobe, Alphabet, Amazon, Cisco, IBM, Microsoft, and Salesforce, as well as smaller specialized vendors
Industry and Market Trends:
- Rapid technological advances, intense competition, and evolving customer demands in the enterprise IT industry
- Increasing customer adoption of cloud-based IT offerings, including SaaS and IaaS
- Regulatory focus on data privacy, security, and responsible AI development
Recent Events:
- Acquired Cerner Corporation, a provider of digital healthcare IT systems, in fiscal 2023
- Continued investment in R&D to enhance existing offerings and develop new cloud-based technologies
- Ongoing restructuring initiatives to improve operational efficiencies and align with cloud-focused strategy
Risk Factors:
- Ability to successfully develop, market, and sell new products and services, and integrate acquired technologies
- Potential security breaches or data privacy issues with cloud-based offerings
- Intense competition and pricing pressure in the enterprise IT market
- Reliance on third-party manufacturing and supply chain partners
- Exposure to foreign currency fluctuations and global economic/political instability
- Potential unfavorable outcomes from tax audits and legal proceedings
Legal Matters:
- Ongoing derivative lawsuits related to Oracle's acquisition of NetSuite and its cloud business disclosures
- Purported class action lawsuit in the Netherlands alleging GDPR violations with Oracle's data management platform
Management's Discussion and Analysis:
- Cloud and license business represents 84-85% of total revenues, with growing cloud services revenues offsetting declines in on-premise license sales
- Hardware business has lower margins than cloud/license, with revenues declining due to strategic shift to cloud infrastructure
- Services business has lower margins than other segments, with revenues also declining
- Significant investments in R&D, cloud infrastructure, and acquisitions to drive future growth
- Strong operating cash flows, with free cash flow generation supporting dividends, share repurchases, and debt repayments
Earnings calls
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Earnings Report 2025Q3 (2025-03-10)
Key takeaways
- OCI is the Primary Growth Engine: OCI's impressive growth rate, driven by AI demand, positions it as the key driver of Oracle's future revenue acceleration.
- AI Inferencing Presents a Significant Opportunity: Oracle's AI data platform and its focus on enabling customers to leverage AI models with their existing data suggest a substantial opportunity in AI inferencing, potentially exceeding AI training in the long term.
- Multi-Cloud Strategy is Gaining Momentum: The rapid growth of multi-cloud database services indicates a successful strategy in partnering with other hyperscalers to expand Oracle's reach and capture database workloads.
- RPO Growth Signals Strong Future Revenue: The massive RPO balance provides a clear indication of future revenue growth and customer commitment to Oracle's cloud services.
- Expense Discipline is Contributing to Margin Expansion: Oracle's focus on controlling expenses, with expenses growing slower than revenue, is contributing to improved operating margins.
Focus of management’s prepared remarks
- Record Bookings and RPO Growth: Oracle achieved its strongest booking quarter ever, adding $48 billion to its backlog, resulting in a total RPO of $130 billion, up 63% year-over-year. This growth excludes any contracts related to Project Stargate.
- Cloud Region Expansion: Oracle has reached a milestone with 101 cloud regions online, surpassing competitors in cloud region count due to the flexibility of its Gen 2 architecture.
- Power Capacity Growth: The growth of power capacity under contract is exceeding the growth in data centers, with expectations to double capacity this calendar year and triple by the end of the next fiscal year.
- OCI as AI Destination: Oracle positions itself as the preferred destination for AI training and inferencing, citing its Gen 2 cloud's speed and cost-effectiveness, along with its high-speed networking capabilities.
- Q3 Financial Performance: Total cloud revenue (SaaS and IaaS) grew 25% to $6.2 billion. SaaS revenue increased by 10%, and IaaS revenue grew by 51%. OCI revenue increased by 51% (54% excluding legacy hosting).
- Cloud Database Services Growth: Cloud database services revenue increased by 28%, with Autonomous Database consumption revenue up 42%.
- Shareholder Returns: Oracle repurchased nearly 1 million shares for $150 million and increased the quarterly dividend by 25% to $0.50 per share.
- FY26 and FY27 Revenue Growth Outlook: Oracle reaffirmed its confidence in meeting its $66 billion revenue target for FY26 and expects FY27 growth to be around 20%.
- Q4 Guidance: Total revenue is expected to grow 9-11% in constant currency, with total cloud revenue growing 24-28% in constant currency. Non-GAAP EPS is expected to be between $1.62 and $1.66 in constant currency.
- AI Data Platform: Oracle has developed a new AI data platform that enables customers to use the latest AI models to analyze data stored in their Oracle databases, unlocking value while maintaining data privacy and security.
Focus of the analyst Q&A
- Project Stargate:
- What is Oracle's unique value proposition in the Stargate project, and what differentiates it from competitors?
- How will Stargate contracts flow through Oracle's financials, especially considering it's a related-party transaction?
- OCI Growth Drivers:
- How is demand unfolding across different OCI environments (AI contracts, multi-cloud, dedicated/sovereign clouds)?
- What is the durability of growth and infrastructure capacity serviceability across these vectors?
- AI Training vs. Inferencing:
- What is the current state of the AI training versus inferencing opportunity?
- How is Oracle differentiated in inferencing, particularly with the AI data platform?
- RPO Trends:
- How should we think about RPO trends over the next few quarters?
- Multi-Cloud Database Deployments:
- How quickly will the planned multi-cloud database deployments with Azure, AWS, and Google be deployed?
- Will these deployments meet the needs of global enterprises requiring primary and backup data centers?
- Impact of AI Agents on SaaS:
- Are AI agents impacting the strategic SaaS business and the pace of conversions from legacy on-prem systems?
- CapEx Efficiency:
- How does Oracle achieve lower CapEx spending per dollar of IaaS/PaaS revenue compared to hyperscalers?
- How should we think about the trajectory of CapEx given the strength of RPO and OCI AI?
Summary
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Financial Performance
Oracle reported a strong Q3 FY25 with total revenue of $14.1 billion, up 8% year-over-year in constant currency. Total cloud revenue (SaaS and IaaS) was up 25% to $6.2 billion. Non-GAAP EPS was $1.47, up 7% in constant currency. The company's RPO reached $130 billion, a 63% increase year-over-year. Q4 guidance includes revenue growth of 9-11% in constant currency and EPS between $1.62 and $1.66 in constant currency.
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Revenue Drivers
The primary revenue drivers were OCI, strategic cloud applications, and cloud database services. OCI revenue grew 51% (54% excluding legacy hosting). Cloud database services grew 28%. AI demand significantly boosted OCI revenue, with GPU consumption growing 3.5 times year-over-year. Multi-cloud database services also contributed significantly, growing more than 10 times year-over-year.
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Profit Margins and Cost Management
The Q3 operating margin was 44%, up slightly from the previous year. The company emphasized operating expense discipline, with expenses growing slower than revenue. While gross profit dollars of cloud services and license support grew 10%, the company is focused on continuing to manage expenses to improve margins.
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Guidance and Outlook
Oracle provided Q4 revenue growth guidance of 9-11% in constant currency and cloud revenue growth of 24-28% in constant currency. Management expressed confidence in achieving the FY26 revenue target of $66 billion and expects FY27 growth to be around 20%. Component delays impacting cloud capacity expansion are expected to ease in Q1 FY26. FY25 CapEx is expected to be approximately $16 billion, more than double last year.
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Strategic Initiatives
Key strategic initiatives include expanding cloud regions (reaching 101 regions), increasing power capacity, and developing the AI data platform. The company is focused on AI training and inferencing, with significant investments in GPU clusters. Oracle is also expanding its multi-cloud database services with Azure, Google, and AWS. The dividend was increased by 25% to $0.50 per share.
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Management Commentary
Management highlighted the company's technological advantage in building large AI clusters that run faster and more economically than competitors. They emphasized the importance of the AI data platform for enabling customers to leverage AI models with their existing data. The overall tone was optimistic, with strong confidence in future revenue growth and market leadership in AI and cloud services. Safra Catz stated that the company has a "clear line of sight" to future revenue growth. Larry Ellison emphasized that inferencing is a much bigger opportunity than AI training.
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Industry and Market Conditions
Oracle views itself as a destination of choice for AI training and inferencing due to its Gen 2 cloud architecture and high-speed networking. The company is benefiting from the increasing demand for cloud services and the migration of on-premise databases to the cloud. Component delays have impacted cloud capacity expansion, but these are expected to ease in the near future. The company is also seeing strong demand for multi-cloud solutions.
Comparative analysis
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Benchmarks (as of 2025-05-23)
Technology Select Sector SPDR Fund (XLK)
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Performance Comparison:
- Oracle Corp. (ORCL) has shown mixed performance compared to the Technology Select Sector SPDR Fund (XLK). Over the past year, ORCL has significantly outperformed XLK, with returns of 26.69% versus 5.69%. However, in shorter time frames such as Year-To-Date, 3 Months, and 6 Months, ORCL has underperformed XLK. For example, YTD, ORCL's return is -5.49% compared to XLK's -2.05%. Over 2 and 3 year periods, ORCL has outperformed XLK, with returns of 53.7% vs 39.73% and 127.18% vs 69.98% respectively.
- The consistency of ORCL's performance relative to XLK has varied. While ORCL has shown strong performance over longer periods, its recent underperformance suggests increased volatility or sector-specific challenges.
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Risk and Return Analysis:
- Oracle Corp. (ORCL) has provided higher annualized returns over the 1, 2 and 3 year periods compared to Technology Select Sector SPDR Fund (XLK). The 1-year annualized return for ORCL is 26.69% versus 5.69% for XLK.
- The annualized volatility of ORCL has generally been lower than XLK until recently. In Q1 and Q2 2025, ORCL's volatility increased significantly, surpassing that of XLK. For example, in Q2 2025, ORCL's volatility ranged from 35.24% to 61.25%, while XLK's ranged from 27.35% to 57.7%.
- Oracle Corp. (ORCL) experienced a maximum drawdown of -40.36% on 2022-09-30, while the Technology Select Sector SPDR Fund (XLK) had a maximum drawdown of -33.56% on 2022-10-12. This indicates that ORCL has a higher risk profile due to its greater potential for significant declines from peak values.
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Risk-Adjusted Performance:
- The Sharpe Ratio of Oracle Corp. (ORCL) has generally been lower than that of Technology Select Sector SPDR Fund (XLK), indicating that XLK has offered better risk-adjusted returns over much of the analyzed period. In recent periods, the Sharpe ratios for both ORCL and XLK have decreased, but XLK has maintained a higher Sharpe ratio.
- The Beta value of Oracle Corp. (ORCL) has increased over time, suggesting that it has become more sensitive to market movements. Initially, ORCL's beta was around or below 1, but it has risen to consistently above 1 in recent periods. As of Q2 2025, ORCL's beta is in the range of 1.38 to 1.42, while XLK's beta is in the range of 1.39 to 1.41.
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Overall Assessment:
- Oracle Corp. (ORCL) has demonstrated strong performance over longer time horizons but has shown recent underperformance and increased volatility compared to the Technology Select Sector SPDR Fund (XLK). While ORCL has provided higher annualized returns, its higher maximum drawdown and fluctuating Sharpe Ratio suggest a riskier investment profile. The increasing beta indicates that ORCL is becoming more sensitive to market movements.
- Investors should be aware of the increased volatility and potential for significant drawdowns in ORCL. While ORCL has the potential for high returns, its risk-adjusted performance has been less consistent than that of XLK. Recent trends suggest that ORCL's risk profile has increased, warranting careful consideration of its role in a diversified portfolio.
Peers Price History(as of 2025-05-23)
- Performance Comparison:
- Oracle Corp. (ORCL) has shown mixed performance compared to ServiceNow, Inc. (NOW) and Palo Alto Networks, Inc. (PANW). Over the past three years, ORCL outperformed its peers, with a total return of 127.18% compared to 120.8% for NOW and 123.17% for PANW. However, over shorter periods such as YTD, 3 Months, and 6 Months, ORCL has underperformed. In the last one year, ORCL has outperformed PANW, but underperformed NOW. The recent one-month performance shows ORCL outperforming both NOW and PANW.
- Risk and Return Analysis:
- Oracle Corp. (ORCL) has provided mixed annualized returns compared to its peers. Over the past three years, ORCL's annualized return of 31.46% was slightly higher than NOW's 30.22% and PANW's 30.68%. However, over the past one and two years, ORCL's annualized returns were lower than NOW's. In terms of annualized volatility, ORCL generally exhibited lower volatility compared to NOW and PANW, indicating a more stable investment. The maximum drawdown for ORCL was -40.36% on 2022-09-30, which is less than NOW's -51.3% on 2022-10-14, but more than PANW's -36% on 2023-01-10.
- Risk-Adjusted Performance:
- The Sharpe Ratio of Oracle Corp. (ORCL) has generally been lower than that of Palo Alto Networks, Inc. (PANW), indicating that PANW has offered better risk-adjusted returns over the analyzed period. While ORCL's Sharpe Ratio has improved recently, it still lags behind PANW. The Beta value of ORCL has fluctuated around 1, indicating market-like sensitivity.
- Overall Assessment:
- Oracle Corp. (ORCL) presents a mixed profile when compared to ServiceNow, Inc. (NOW) and Palo Alto Networks, Inc. (PANW). While ORCL has shown strong performance over the long term (3 years), its recent performance has been less impressive, with underperformance in YTD, 3-month, and 6-month returns. ORCL's lower volatility and market-like beta suggest a more stable investment compared to its peers. However, its Sharpe Ratio indicates that PANW has offered better risk-adjusted returns. Investors should consider their investment horizon and risk tolerance when evaluating ORCL against NOW and PANW.
Peers Fundamentals(as of 2025-02-28)
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Market Position and Size:
- Oracle Corp. (ORCL) dominates its peer group with a market capitalization of $437375.75 million, significantly greater than ServiceNow, Inc. (NOW) at $207887.52 million and Palo Alto Networks, Inc. (PANW) at $124524.9 million.
- This substantial market cap is supported by higher revenue ($55783 million), EBITDA ($23772 million), and Net Income ($12159 million) compared to its peers.
- Oracle's size and financial metrics indicate a well-established and diversified business, giving it a leading position in the "Packaged Software" industry.
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Profitability and Efficiency:
- Oracle's Gross Profit Margin is 66.63%, less than ServiceNow (78.92%) and Palo Alto Networks (73.56%), but significantly greater than the industry average of -52.57%.
- Its EBITDA Margin of 42.62% is substantially greater than ServiceNow (17.47%) and Palo Alto Networks (15.43%), and far exceeds the industry average of -5494.67%.
- Oracle's Net Profit Margin is 21.8%, greater than ServiceNow (13.41%) and Palo Alto Networks (13.95%), and significantly greater than the industry average of -4919.34%.
- These figures suggest that Oracle is highly efficient in managing costs and converting revenue into profit, despite having a slightly lower Gross Profit Margin than its peers.
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Financial Health and Stability:
- Oracle's Current Ratio is 1.02, less than ServiceNow (1.06) and the industry average of 2.88, but greater than Palo Alto Networks (0.85).
- Its Quick Ratio is also 1.02, less than ServiceNow (1.06) and the industry average of 2.84, but greater than Palo Alto Networks (0.85).
- A Total Debt to Total Equity Ratio of 575.47 is significantly greater than ServiceNow (23.66), Palo Alto Networks (10.08), and the industry average of 84.58, indicating a highly leveraged balance sheet.
- Oracle's Debt / EBITDA is 4.05, greater than ServiceNow (0.74) and Palo Alto Networks (0.28), but less than the industry average of 5.95.
- While Oracle's liquidity ratios are below the industry average, its Debt/EBITDA ratio suggests it can manage its debt obligations. However, the high debt-to-equity ratio is a significant concern.
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Valuation and Market Perception:
- Oracle's Enterprise Value To Sales is 9.97, less than ServiceNow (14.17) and Palo Alto Networks (14.61), but significantly greater than the industry average of -19.94.
- Its Enterprise Value To EBITDA is 23.4, less than ServiceNow (80.63), Palo Alto Networks (94.43), and the industry average of 97.62.
- A Price To Earnings ratio of 36.65 is less than ServiceNow (136.34), Palo Alto Networks (106.87), and the industry average of 465.92.
- Oracle's Price to Book Ratio is 26.13, greater than ServiceNow (20.5) and Palo Alto Networks (17.2), and greater than the industry average of 8.01.
- The Price To Sales Ratio is 8.04, less than ServiceNow (18.34) and Palo Alto Networks (14.89), and also less than the industry average of 54.94.
- These valuation metrics suggest that Oracle is undervalued compared to its peers based on EV/Sales, EV/EBITDA, and P/E ratios, but its higher Price to Book Ratio indicates a premium on its assets.
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Cash Flow and Capital Management:
- Oracle's Net Operating Cash Flow is $20745 million, significantly greater than ServiceNow ($4603 million) and Palo Alto Networks ($3207.9 million).
- Total Capital Expenditure is $14933 million, significantly greater than ServiceNow ($975 million) and Palo Alto Networks ($207.3 million).
- Oracle's Free Cash Flow is $5812 million, greater than ServiceNow ($3628 million) and Palo Alto Networks ($3000.6 million).
- Oracle generates substantial cash flow from operations, but its high capital expenditure reduces its free cash flow. Still, its free cash flow is greater than its peers.
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Growth and Future Prospect:
- Oracle shows consistently lower growth compared to the peer group average in most metrics, including Sales/Revenue, EBITDA, Net Income, and Basic Earnings per Share.
- Its Free Cash Flow and Free Cash Flow Margin experienced significant year-to-year fluctuations.
- Oracle's 3-year CAGR is greater than its 5-year CAGR for Sales/Revenue, EBITDA, Net Income, Basic Earnings per Share, and Free Cash Flow Margin, suggesting a recent acceleration in growth for these metrics. However, its Free Cash Flow 3-year CAGR is less than its 5-year CAGR.
- Oracle's competitive position may be at risk due to its lower growth rates compared to peers.
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Potential for Investment:
- Oracle offers a blend of stability and value. Its strong profitability, cash flow, and lower valuation metrics (P/E, EV/EBITDA) may appeal to value investors.
- However, its high debt levels and slower growth rates compared to peers could limit its upside potential.
- Investors should weigh its current strengths against its growth prospects and financial leverage.
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Key Risks and Considerations:
- Oracle's high debt levels pose a significant risk, potentially limiting its financial flexibility and increasing its vulnerability to economic downturns.
- Slower growth rates compared to peers could erode its market share over time.
- The company's below-average liquidity ratios may raise concerns about its ability to meet short-term obligations.
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Overall Assessment:
- Oracle's overall financial position is characterized by strong profitability, substantial cash flow, and a dominant market position.
- However, its high debt levels and slower growth rates compared to peers are areas of concern.
- While its size provides stability, Oracle needs to manage its debt and improve its growth trajectory to maintain a competitive edge in the long term.
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