Oracle (NYSE:ORCL) reports after the closing bell Monday, March 10th, 2025, with street consensus expecting $1.49 in earnings per share on $14.39 billion in revenue, for expected y-o-y growth of 6% and 8% respectively. Operating income is expected at $6.27 billion and is projected to grow 8% y-o-y.
The stock had an incredible run in calendar ’24, despite what was just an average 6% revenue growth rate and 8% EPS growth rate the last 3 quarters.
One plus is that ORCL faces an easy compare vs the Q4 ’24 fiscal last year when revenue grew 3% y-oy and EPS fell 2% y-o-y. Typically, ORCL’s fiscal Q4 every year is their strongest quarter of the year, with consensus expecting (as of today) $1.79 on $15.92 billion in revenue for expected y-o-y growth of 10% and 11% respectively.
Oracle peaked at $196 per share in late November ’24, just before the November ’24 quarter was reported in December. The stock is down 20% – 21% from its November ’24 high print.
In fiscal Q2 ’25 (ended 11/24), revenue grew 9%, operating income grew 10% and EPS grew 10% as the RPO (remaining performance obligation) surged 50% to $97 billion.
EPS is expected to grow an average of 13% per year, over the next 3 years, with current PE at 25x so the stock is fully-valued on a PE-to-growth basis. Revenue growth is expected to average 12% per year from fiscal ’25 to fiscal ’27.
Where would Oracle be bought with confidence: last quarter or Feb ’25 fiscal Q2, Oracle earned $7 per share in cash-flow. Let’s assume that Oracle can do $7.50 per share (trailing-twelve-month) in this fiscal Q3 ’25, at 15x that CFPS (cash-flow-per-share), Oracle would be fairly valued between $110 – $115 per share.
It’s seriously doubtful that it trades that low, but the Cerner (NASDAQ:CERN) acquisition continues to dilute shareholders, and Oracle has these periods where the operating margin just collapses, so if the operating margin would trend back down to 40%, readers might get a better shot at owning Oracle lower, even with the drop in the stock already.
The Technicals
After the stock peaked at $196 in late November ’24, it’s fallen all the way down to $155 as of last Friday’s close, or $40 per share in just three months.
The testing of the 50-week moving average is a good sign, even better if Oracle consolidates above that key average.
Like a lot of the large-cap tech leaders Oracle has had a rough few months and is now sitting at longer-term support.
Conclusion
Oracle has been written about numerous times on this blog and has certainly – and I might add surprisingly – been a big beneficiary of the AI boom. Oracle Cloud Infrastructure (OCI) has grown at healthy y-o-y rates, usually between 30% – 50% the last 6 – 8 quarters.
Clients don’t have a big position in the stock since I was reluctant to chase ORCL when I already owned Microsoft (NASDAQ:MSFT), and I’d always been uncomfortable with Oracle’s earnings quality, particularly given that Microsoft’s earnings quality was so much better.
Although Larry Ellison is long-term winner in technology and a fabulously wealthy individual, I’ve always felt that Oracle flew a little close to the sun (so to speak) with the hype machine in full swing when large-cap technology was benefitting from the server buildout or the internet, or the cloud space, or what is now the AI frenzy. Oracle didn’t transition well to the cloud from 2010 to 2019, but the team pushed IAAS and PAAS, and everything else and even got the numbers up a little to where Oracle looked like they were gaining some share, and then it all fell apart, with little explanation, somewhere around 2014, 2015, 2016 (can’t recall) and the stock was never really repurchased after that. The penchant for large acquisitions which become seriously dilutive for a period of 2 -3 years, don’t help either.
They seem to have done a better job of getting out in front with AI and making it count.
Again, very little of the stock is owned for clients at present. Oracle has been hammered like everything else large-cap tech and AI-related.
Disclaimer: None of this is advice or a recommendation, but only an opinion. Past performance is no guarantee of future results. Investing can and does involve the loss of principal even for short periods of time. None of this information above may be updated, and if updated may not be done so in a timely fashion. All return data is sourced from Morningstar.