The market looks too pessimistic about revenue from computing capacity Oracle is delivering. Customer advances complicate cash generation, but a conservative profit-margin forecast still supports a buy without assuming funding problems disappear.
Key points
- $100 billion of fiscal 2028 revenue approximately supports today's price under my valuation assumptions.
- $112 billion is my fiscal 2028 revenue forecast as delivered capacity earns revenue.
- $16.8 billion was the fiscal Q1 2027 cash shortfall after investment, excluding large financing-related customer advances.
The call
The market looks too pessimistic about delivery. At my assumed earnings multiple, today's price requires roughly $100 billion of fiscal 2028 revenue with a 32% operating margin, the share left after operating costs. That requires only 11% growth from management's fiscal 2027 revenue floor.
Customer advances mask the cash gap ($ billions)Oracle September 11, 2026 10-Q; Q1 FY27. Removes only financing-component customer advances.
I expect delivered capacity to overcome funding fears, not eliminate them. My fiscal 2028 forecast combines $61 billion of infrastructure revenue with $51 billion from everything else. The margin forecast falls below the latest quarter's level because equipment depreciation, the expense of wearing out assets, and new-site costs will rise.
Valuation
| My estimate or assumption | Figure |
|---|
| Fiscal 2028 revenue | $112 billion |
| Fiscal 2028 operating margin | 32% |
| Fiscal 2028 diluted common shares | 3.10 billion |
| Fiscal 2028 earnings per share, including stock compensation | $7.58 |
| October 2027 earnings multiple | 22 times |
| Twelve-month target, using unrounded earnings | $166.69 |
Earnings assume fiscal 2028 net interest expense of $6.8 billion, an 18% tax rate and $325 million of preferred dividends. The multiple balances rapid infrastructure growth against borrowing, long leases and uncertain cash generation. Stress cases of $96 and $222 show meaningful downside, so this is a buy, not a strong buy.
Profit margins decide the upside ($ per share)Our FY28 scenarios, October 8, 2026; $112B revenue and 22 times earnings held constant.
Risks
- Funding could require more common shares: watch new offerings and operating cash excluding financing-related advances, rather than headline cash generation.
- Power delays could postpone revenue while leases start: watch delivered capacity and changes to the near-term contracted-revenue schedule.
- Equipment costs could overwhelm growth: watch depreciation and operating margins as unfinished sites enter service; higher rates would add financing pressure.
What would change my mind
I would withdraw the buy if fiscal 2027 revenue falls below $90 billion or operating margin stays below 30% for two consecutive quarters through August 2027.
