Gotrade News – Oracle stock rose 1.09% to close at around $190.72 on May 27, 2026 as analysts labeled the stock an undervalued AI stock. According to The Motley Fool, the database giant is currently positioned as the No. 4 hyperscaler after AWS, Azure, and Google Cloud.
This thesis hinges on Oracle Cloud Infrastructure backlog transformation and aggressive data center capital investment. Investors are weighing short-term margin pressures against multi-year cloud revenues that will accrue once new capacity comes online.
Important points
- Oracle (ORCL) led to FY2026 revenue of $67 billion after achieving $57.4 billion in FY2025.
- Revenue for the third quarter of fiscal 2026 was $17.2 billion, up 22% year-over-year driven by cloud infrastructure demand.
- Even though Oracle is a hyperscaler, its forward P/E is 24.0x, about the same as ServiceNow’s 23.9x.
Hyperscaler #4 paper
Oracle generated $57.4 billion in revenue in fiscal 2025, with 8% growth and 21.7% net income. Management is on track for fiscal 2026 revenue of $67 billion, which means revenue from cloud demand will accelerate by about 17%.
This acceleration was already evident in the quarterly print edition, where sales for the third quarter of 2026 increased by 22% to $17.2 billion. As The Motley Fool reported, Oracle’s OCI backlog positions it to gain share alongside Microsoft (MSFT) in enterprise AI workloads.
The intensity of capital spending is a catalyst, and so are the risks. Oracle spends millions building data centers that turn signed contracts into cloud revenue.
This expenditure resulted in free cash flow of negative $394 million, and the debt ratio rose to 5.1 times. Investors are effectively buying in advance of the cloud revenue shift that should be realized through backlog transformation.
Evaluation and ServiceNow
A cross-comparison with ServiceNow (NOW) makes the case for undervaluation clear. ServiceNow’s 2025 revenue was $13.3 billion, with 21% growth and 13.2% net income, and sustained 22% growth through the first quarter of 2026 to $3.4 billion.
In terms of forward P/E, the two companies’ stock prices are almost the same, with Oracle at 24.0x and ServiceNow at 23.9x. The price-to-sales differential is widening, with ServiceNow’s 7.0x lower than Oracle’s 8.8x.
Balance sheet quality is definitely in ServiceNow’s favor, with a debt-to-equity ratio of 0.2x and free cash flow of $4.6 billion versus Oracle’s leverage. Oracle’s defenders argue that the hyperscaler’s scale and cloud recurring revenue base justify its premium sales ratio.
Motley Fool analysts recommended Oracle as the better buy despite the leverage difference. Reasons cited include Oracle’s decades of execution history, new co-CEO leadership, and a 1% dividend yield that ServiceNow does not offer.
