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J.P. Morgan on Oracle: Triple-Digit IaaS Growth Backs $200 Target — Overweight

Posted on by Eben@CANSLIM Research
Eben@CANSLIM Research's avatarEben@CANSLIM Research

J.P. Morgan has reiterated its Overweight rating on Oracle (ORCL) and a December 2027 price target of $200 after the company’s F1Q27 results showed total revenue growth of +30% y/y on triple-digit Cloud Infrastructure growth and a further $26B sequential build in remaining performance obligations (RPO). The broker argues the print addresses the three concerns that have weighed on the shares since the June quarter — RPO durability, RPO-to-revenue conversion, and the need for further capital raises — while flagging that the funding debate is unlikely to be settled soon.

Key Takeaways

  • J.P. Morgan rates Oracle (ORCL) Overweight with a Dec-27 price target of $200, down from a prior Dec-26 target of $210, based on ~13x EV/pro forma operating income on a FY28 PF operating income forecast of $62bn.
  • Oracle’s F1Q27 total revenue reached $19.35B, up 30% y/y in both USD and constant currency, above J.P. Morgan’s $19.25B estimate and consensus of $19.13B, led by IaaS of $7.4B (+121% y/y).
  • Oracle’s RPO rose to $664B, up 46% y/y and $26B sequentially, with roughly half now expected to convert to revenue within 36 months.
  • Oracle booked more than $30B of new AI cloud contracts in the quarter, predominantly on prepay or bring-your-own-hardware structures that management says require no incremental cash from Oracle.
  • Oracle guided FY27 total revenue to at least $90B (+34% y/y CC) and PF EPS to $8.10, reaffirming gross capex of $90–95B and net cash capex of no more than $70B.

What J.P. Morgan’s F1Q27 Review Says About Oracle

In a report titled “F1Q27 Review: Triple-Digit IaaS Growth and Another $26B of Backlog Solidify the Revenue Path, While Funding Remains the Debate; Reiterate OW,” J.P. Morgan analysts Jaiden R Patel, Brian Hyska and Mashu Nishi argue that Oracle delivered a quarter that helps address the key concerns weighing on the shares since the June period. Those concerns centred on the durability of RPO increases, the conversion of RPO into revenue amid noise around datacentre delays, and the potential need for further capital raises beyond amounts already communicated.

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