Gotrade News - Oracle shares closed near $190.72 on May 27, 2026, up 1.09%, as analysts framed the stock as an undervalued AI play. According to The Motley Fool, the database giant is now positioned as the fourth hyperscaler behind AWS, Azure, and Google Cloud.
The thesis hinges on Oracle Cloud Infrastructure backlog conversion and aggressive data center capex spending. Investors are weighing near-term margin pressure against multi-year cloud revenue that will land once new capacity comes online.
Key Takeaways
- Oracle (ORCL) guided $67 billion in fiscal 2026 revenue after delivering $57.4 billion in FY25.
- Q3 fiscal 2026 revenue grew 22% year-over-year to $17.2 billion on cloud infrastructure demand.
- Forward P/E sits at 24.0x, nearly identical to ServiceNow's 23.9x despite Oracle's hyperscaler status.
The Hyperscaler #4 Thesis
Oracle generated $57.4 billion in fiscal 2025 revenue with 8% growth and a 21.7% net margin. Management has guided to $67 billion for fiscal 2026, implying roughly 17% top-line acceleration from cloud demand.
The acceleration is already visible in quarterly prints, with Q3 FY26 revenue up 22% to $17.2 billion. As reported by The Motley Fool, Oracle's OCI backlog positions it to capture share alongside Microsoft (MSFT) in enterprise AI workloads.
Capex intensity is the catalyst and the risk in equal measure. Oracle is spending heavily to build the data centers that convert signed contracts into recognized cloud revenue.
That spending has pushed free cash flow to negative $394 million and lifted debt-to-equity to 5.1x. Investors are effectively buying ahead of the cloud revenue inflection that backlog conversion should deliver.
Valuation Versus ServiceNow
The cross-comparison with ServiceNow (NOW) sharpens the undervaluation case. ServiceNow posted $13.3 billion in 2025 revenue with 21% growth and a 13.2% net margin, holding 22% growth into Q1 2026 at $3.4 billion.
On forward P/E the two names trade almost identically, with Oracle at 24.0x against ServiceNow's 23.9x. The gap widens on price-to-sales, where ServiceNow's 7.0x undercuts Oracle's 8.8x multiple.
Balance sheet quality favors ServiceNow decisively, with 0.2x debt-to-equity and $4.6 billion in free cash flow against Oracle's leverage. Oracle's defenders argue that hyperscaler scale and a recurring cloud revenue base justify the premium price-to-sales.
The Motley Fool analyst recommended Oracle as the superior buy despite the leverage gap. Cited reasons include Oracle's decades-long execution record, fresh co-CEO leadership, and a 1% dividend yield that ServiceNow does not offer.
