Bernstein | Oracle (ORCL) FY26: What Is Happening Under the Hood—Latest Update
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Bernstein reiterates Outperform on Oracle with a US$325 target, ~130% above the September 1, 2026 close of US$141.32. Addressing debates over AI data-center profitability, stability and cash needs, it updates its product-line revenue decomposition (used since 2018) to FY26. PaaS/IaaS revenue reached US$18,101mn, up 77%, accelerating each quarter (55%, 68%, 84% and 93% in 1Q–4Q); cloud database services exited at a ~US$3bn run rate (FY26 US$2,990mn; 4Q US$839mn), while OCI ex-cloud-database grew 94% to US$14,804mn. Strategic back office (ERP+HCM) was ~US$9.9bn, +15%: Fusion ERP ~US$4.3bn (+15%), NetSuite ~US$4.2bn (+13%), Fusion HCM ~US$1.4bn (+21%), from ~US$8.6bn in FY25. Hardware grew 5% and should slowly decline; services rose ~10%, and Bernstein expects Oracle to shrink services (especially Cerner) to offset cloud gross-margin dilution. Organic constant-currency growth has steadily improved since FY21. The thesis: Oracle is early in a massive investment cycle that should drive revenue, EPS and FCF acceleration with potential to become the third-largest hyperscaler, nearing the end of incremental cash needs; that value creation is not yet in the valuation. FY27 growth should accelerate, also building credibility for sovereign cloud AI.