JPMorgan ups Oracle to Overweight on improved risk/reward after fiscal Q3 beat and recent selloff

 

JPMorgan upgrades Oracle to Overweight from Neutral, trims price target to $210 on improved risk/reward after fiscal Q3 beat and recent selloff

• Fiscal Q3 2026 non-GAAP EPS $1.79 and revenue $17.2B both grew 22% YoY, beating estimates.
• Organic revenue and non-GAAP EPS both grew 20%+ in USD, exceeding internal expectations.
• Cloud applications revenue grew 11% in constant currency to a $16.1B run-rate, with strong vertical SaaS demand.
• Cloud applications deferred revenue grew 14%, outpacing in-quarter applications growth and signaling accelerating demand.
• Multi-cloud database revenue surged 531% YoY, aided by expanded Azure, Google, and AWS regions.
• AI infrastructure revenue grew 243% YoY, with over 400 megawatts of capacity delivered and demand exceeding supply.
• Newly delivered AI capacity achieved 32% gross margin, above 30% guidance, with higher-margin services improving mix.
• Remaining performance obligations reached a record $553 billion, driven largely by large-scale AI infrastructure contracts.
• Oracle raised $30B of planned $50B 2026 financing and is exploring customer-funded, bring-your-own-hardware models.
• Oracle raised 2027 revenue guidance to $90B during its fiscal Q3 2026 earnings update.
• Management strongly rejected a 'SaaS apocalypse' narrative, positioning embedded AI agents as a key competitive differentiator.
• Main risk is executing large, capital-intensive AI capacity expansion while sustaining attractive returns and clarifying future capital expenditure trajectory.

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