Mizuho analyst Siti Panigrahi reiterated a Buy rating on Oracle Corp
The analyst expects Oracle to report a solid Q2, driven by its strong cloud business (OCI, Fusion SaaS, with particular strength in NetSuite).
In addition, he expects the pricing uplift to Java and lower-than-expected headwinds from Cerner to help Oracle beat consensus expectations of 6% top-line growth.
While Panigrahi expects Q2 to be solid, he anticipates a strong Q3 guide (mainly if AI Superclusters (GPUs) come online sooner than expected), which could help shares re-rate.
Despite the run-up in shares (up 37% year-to-date), ORCL continues to offer an attractive risk-reward with its accelerating growth with AI tailwinds.
His Q2 consensus estimate for Cloud Services and License Support revenue is $9.7 billion (implying 13% growth including Cerner vs. in-line with Q1 growth), which includes Applications (consensus estimate of $4.4 billion, implying 8% Y/Y growth vs. 11% in FQ1) and Infrastructure (consensus estimate of $5.1 billion, meaning 13% Y/ Y growth vs. 15% in Q1).
With consensus forecasting 28% cloud growth (vs. 29% delivered in Q1), the upside in Q2 would come from the cloud, potentially delivering 29%+ growth as his checks indicate that demand for Fusion SaaS apps (especially NetSuite) and OCI remains robust in the current environment.
Panigrahi noted that Oracle is on track to deliver margin improvements and return to its 45%+ margin guide while accelerating its revenue growth.
Oracle has transitioned its Fusion SaaS apps onto OCI Gen II and serverless autonomous databases. It is transitioning NetSuite and Cerner applications onto OCI Gen II, which should enable gradual margin improvements over the near term.
The analyst expects Q2 revenue and EPS of $13.05 billion and $1.32 billion, respectively, in line with the consensus.
Price Action: ORCL shares traded higher by 0.15% at $112.20 on the last check Thursday.
