Oracle Corp. (NYSE:ORCL) heads into earnings this week with demand not in question, according to DA Davidson’s Gil Luria, who said the real test is whether the company can overcome constraints on capital and compute capacity to sustain its growth trajectory.
Real Constraints are Compute and Capital
In an interview with CNBC on Friday, Luria said Oracle faces two challenges heading into earnings.
Data center buildout is one challenge, he said. The company relies on “a handful of large projects,” including a New Mexico facility that can’t secure a gas connection, so a single project stumbling puts revenue growth at risk.
Capital is the second, as Oracle entered the AI cycle with a heavily leveraged balance sheet after taking on debt to acquire Cerner, leaving it with little flexibility.
Luria said investors will be watching for confirmation that Oracle completed an at-the-market equity offering launched earlier this year, with debt paydown essential to sustaining its current trajectory.
Demand Isn’t the Problem
“Demand is not a problem,” the analyst said. “They could sell any compute they have, and in fact, they’d be better off selling it” on the market rather than locking in long-term contracts.
Space Exploration Technologies Corp. (NASDAQ:SPCX) has already signed a compute deal with Anthropic reportedly worth about $1.25 billion a month, giving the AI startup access to its full Colossus data center capacity, while Meta Platforms Inc. (NASDAQ:META) was reportedly in early talks in July to lease up to $10 billion in computing capacity to Anthropic over two years.
Luria said doing something similar could be a “positive surprise” for Oracle this quarter, adding it “could get an even better price.”
Wall Street Expectations
Oracle is scheduled to report first-quarter fiscal 2027 earnings on Sept. 10 after market close.
For the first quarter of fiscal year 2027, Oracle guided EPS of $1.72 to $1.76 against a consensus of $1.61, and revenue of $18.96 billion to $19.25 billion versus estimates of $19.13 billion.
Oracle affirmed its fiscal 2027 revenue outlook of $90 billion and non-GAAP EPS of $8.05.
In the fourth quarter, Oracle posted revenue of about $19.18 billion, up 21%, beating analyst estimates of approximately $19.09 billion, according to Benzinga Pro. Its adjusted earnings grew 24% year-over-year to $2.11 per share, beating analyst estimates of $1.89 per share.
Share Performance
Shares in the company have fallen 18.87% so far this year and 33.42% over the past year.
Price Action: On Friday, Oracle shares closed 3.08% higher at $158.78 and gained 0.58% in extended trading.
Benzinga Edge rankings indicate Oracle’s stock has a Momentum score in the 6th percentile and a Growth score in the 96th percentile.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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