“Mizuho’s Bold Call: Why ORCL’s Gains Are Just Getting Started!”

Introduction 🚀

Oracle Corporation (NYSE: ORCL) has surged to record highs on the back of a cloud and AI boom, and even a recent pullback hasn’t dimmed bullish analysts’ outlook. In fact, Mizuho Securities has doubled down on Oracle – reiterating an “Outperform” rating and raising its price target to $400 per share (about 84% above mid-November levels) (^[1]). Mizuho analyst Siti Panigrahi views the recent ~30% slide in ORCL as “a buying opportunity”, arguing that Oracle’s momentum in cloud infrastructure and AI remains robust (^[1]). This bold call aligns with a broader wave of optimism: other Wall Street targets range as high as $430, underscoring the view that Oracle’s gains are just getting started (^[1]). Below, we dive into Oracle’s fundamentals – from shareholder returns and leverage to valuation and risks – to assess what’s behind this optimism and what investors should watch going forward.

Dividend Policy & Shareholder Returns 💵

Oracle has a history of rewarding shareholders, though its dividend yield remains modest due to the stock’s swift ascent. The company has raised its dividend annually in recent years, declaring $1.36 per share in FY2023 (up from $1.28 in 2022 and $1.04 in 2021) (^[2]). In March 2025, Oracle’s board approved a 25% dividend hike to $0.50 quarterly (annualized $2.00) (^[3]) – reflecting confidence in cash flows and bringing the forward yield to roughly 0.9% at recent prices. This yield is below Oracle’s five-year average (~1.3%) (^[4]), a consequence of the stock’s sharp rally. However, the payout ratio remains moderate: for FY2023, the $3.7 billion of dividends paid was about 22% of operating cash flow and ~36% of free cash flow (^[5]) (^[2]), leaving ample room for continued increases. Oracle’s generous cash generation (over $20 billion CFO in FY2024 (^[5])) comfortably covers its dividend obligations.

Beyond dividends, share buybacks have been a major component of Oracle’s capital return strategy. The company aggressively repurchased stock during 2021–2022 – buying back 515 million shares for $37.2 billion over those two fiscal years (^[2]) – which significantly shrank the float and boosted earnings per share. This pace slowed in FY2023 (only $1.3 billion repurchased) as Oracle shifted focus to integrating acquisitions and managing debt (^[2]). Management has signaled that new buybacks will be tempered until leverage is reduced below certain thresholds (^[2]), prioritizing financial flexibility. As of May 2023, $8.2 billion remained authorized for repurchases (^[2]). In summary, Oracle’s dividend has grown at a healthy clip and is well-covered by cash flows, while past buybacks have delivered substantial shareholder value (and helped founder Larry Ellison’s stake), albeit at the cost of higher debt. Today’s yield is slim, but income investors can take comfort in Oracle’s dividend reliability and the possibility of future raises (^[2]) (^[3]).

Leverage, Debt Maturities & Coverage ⚖️

Oracle’s growth spree – including the $28 billion Cerner acquisition – was partly debt-financed, leaving the company with elevated leverage. As of FY2023, Oracle carried roughly $91 billion in total debt (^[2]). This translates to a debt-to-equity ratio around 4.0–4.4 (depending on equity fluctuations) (^[6]) (^[7]), an unusually high figure for a tech blue-chip. Massive stock repurchases (which reduced equity) and new borrowings have driven this leverage. Importantly, Oracle’s debt is long-term in nature: only about $4.06 B and $10.0 B of principal come due in FY2024 and FY2025, respectively (^[2]), while over $55 B matures beyond FY2028. Major upcoming maturities include a term loan due August 2025 and several bonds (e.g. $2 billion notes due July and November 2024) (^[2]) (^[2]). Oracle has been proactive in refinancing – issuing $12.3 B of new bonds in FY2023 at fixed rates of up to ~6.9% for 30-year debt (^[2]) – and retains a $6 B revolving credit facility (undrawn as of May 2023) for liquidity (^[2]) (^[2]).

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Despite the heavy debt load, coverage ratios remain solid. In FY2023, interest expense was $3.5 B (^[2]), while income before tax was $9.1 B (^[2]) – implying EBIT/interest coverage of ~3.6×. Likewise, Oracle’s EBITDA-to-interest covenant requires at least 3.0× coverage (^[2]), a threshold the company comfortably met. Cash flow-based coverage is even healthier: operating cash flow was ~5.8× total interest paid in FY2023, underscoring an ability to service debt (^[2]) (^[5]). That said, interest costs have been rising (+27% YoY in FY2023) as new debt is issued at higher rates (^[2]). Oracle’s weighted average interest rate on recent borrowings climbed into the mid-5% range (e.g. a term loan effective ~5.8% (^[2])), versus older notes issued at 3–4%.

Leverage is a key watch item going forward. Oracle’s management acknowledges the need to deleverage; the company has even moderated share buybacks until “gross debt is reduced” further (^[2]). Fortunately, robust cash flows (over $9.5 B free cash flow in the last year (^[5])) give Oracle options to pay down debt or refinance as needed. Oracle’s credit profile remains investment-grade, and it was in compliance with all debt covenants as of the latest report (^[2]). Still, in a higher-rate environment, the $14+ B due by 2025 will bear watching – any difficulty rolling over these obligations or a significant uptick in interest expense could pressure earnings. Overall, Oracle’s balance sheet is stretched but manageable: high debt is offset by strong interest coverage and liquidity.

Valuation & Growth Outlook 📈

Oracle’s share price performance in 2023–2025 has dramatically re-rated its valuation multiples. The stock recently traded around 50–70× earnings, near the top of its 10-year range (^[7]) (^[6]). For instance, at ~$248 per share (Aug 2025), Oracle’s P/E was ~57 (trailing GAAP) with a PEG ratio of ~3.7 (^[6]). At the October 2025 peak near $300+, the P/E reached over 70 on trailing earnings (^[7]) – reflecting investors’ optimism for future growth. Other metrics likewise flash premium: Oracle’s price-to-sales ratio around 15× is at a decade high (^[7]), and its free cash flow yield (market cap ~$700B vs. ~$9.5B FCF) hovers barely above 1%. Such rich multiples imply that a lot of growth is priced in. Indeed, consensus analyst targets assume significant earnings expansion (FY2024 EPS was expected to approach $5 (^[6]), up from GAAP $3.07 in FY2023).

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Is this valuation justified? Bulls argue yes, pointing to Oracle’s accelerating cloud business and AI catalyst. The company’s revenue growth has picked up to double-digits (e.g. +11% YoY in the latest quarter) (^[6]) after a long flat period, and operating margins remain strong (~32% op margin) (^[7]). Oracle’s cloud infrastructure (OCI) and cloud SaaS businesses are growing rapidly, which could sustain a higher earnings trajectory than the legacy software business did. Mizuho, for example, sees Oracle “expanding its remaining performance obligations (RPO) by $65 B from just four large customers” in AI and cloud deals (^[1]) – a sign of multiyear revenue backlog. Additionally, Oracle’s strategic partnerships (Microsoft, NVIDIA, etc.) and multi-cloud offerings could unlock new markets. Bulls also note Oracle’s strong profitability (21% net margin (^[6])) and shareholder-friendly capital return, which support a growth-and-income narrative.

Skeptics, however, warn that Oracle’s valuation “leaves little room for disappointment” (^[1]). The stock now trades at a premium to many tech peers and far above its historical average, so any growth shortfall or margin pressure could trigger a pullback. Notably, Oracle’s cloud division profitability is currently low: one analysis estimated Oracle’s AI cloud business generated ~$900 M revenue last quarter but only ~$125 M gross profit (∼14% margin) (^[1]), well below Azure or AWS margins. Oracle itself has acknowledged that renting NVIDIA GPU capacity for AI workloads is yielding only ~16% gross margins presently, with hopes to reach 30–40% by 2030 (^[1]). This raises the question of how profitable the AI/cloud boom will be near-term. The market appears to be valuing Oracle more like a fast-growth cloud company than a mature database firm – a bet that must be validated by sustained high growth in revenue and earnings. In sum, Oracle’s valuation is high by any conventional measure, supported by a belief in a transformational growth story. This optimism is exemplified by Mizuho’s and others’ lofty price targets, but it also highlights the risk of multiple compression if Oracle stumbles.

Risks, Red Flags, and Open Questions ⚠️

While Oracle’s trajectory has excited investors, there are notable risks and uncertainties to monitor:

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– Cloud/AI Growth vs. Profitability: Oracle’s ambitious 2030 goals – management is targeting $225 B in revenue and ~$21 EPS by FY2030 (^[7]) – imply extraordinary growth that some view as unrealistic. J.P. Morgan’s Mark Murphy pointed out that Oracle’s roadmap would require net new revenues to spike ~150% in FY2028 (during an AI ramp) then abruptly decelerate (^[1]), a pattern that could be difficult to execute. Moreover, achieving those revenues likely means continued massive capital expenditures (Oracle’s capex jumped 55% in FY2024 to ~$10.7 B (^[5]) for data centers) and operating at lower cloud margins for years. The open question is whether Oracle can scale up its cloud profitably. If AI infrastructure remains margin-dilutive (as current 10–15% gross margins suggest (^[1])), Oracle might hit an profitability ceiling or have to raise prices, potentially slowing demand. The market is still skeptical: the stock’s recent 30% slide reflects doubts about “how profitable this AI boom will actually be for Oracle” (^[1]). Investors will be watching upcoming earnings to see if cloud gross margins and bookings improve as Oracle ramps its new Abilene, TX mega-datacenter (on track per management (^[8])).

– Competition & Customer Concentration: Oracle is attempting to “cement its position as the 4th hyperscaler” in cloud (^[9]), but it faces formidable competitors. Amazon AWS and Microsoft Azure still dominate cloud infrastructure, with Google Cloud and others also vying for AI workloads. Oracle’s strategy of focusing on enterprise and offering multi-cloud compatibility (e.g. letting Oracle databases run on AWS/Azure) is clever (^[9]), but winning new cloud-native customers won’t be easy. There’s also concentration risk in its current cloud surge – a few massive deals account for a large chunk of Oracle’s cloud backlog (Mizuho cited four customers behind that $65 B RPO increase) (^[1]). If any of these large customers (possibly government contracts or key corporate clients) were to delay or cut back, Oracle’s growth could hiccup. Additionally, Oracle’s database franchise, while still critical globally, faces gradual pressure from open-source and new cloud-native databases. The risk is that Oracle must keep transforming its business without alienating its legacy database customers or losing share to emerging tech.

– High Leverage & Financial Flexibility: Oracle’s roughly $90 B debt burden is a double-edged sword. It enabled aggressive buybacks and acquisitions, but it leaves Oracle with less room if the macro environment worsens. A rising interest rate scenario could increase interest expense (already ~$3.5 B/year) (^[2]) and squeeze free cash flow, especially if Oracle continues heavy capex and dividends. Oracle’s current ratio of 0.75 and large debt maturities in coming years mean it relies on steady cash generation and capital market access (^[6]). Any unexpected downturn in earnings or credit downgrade could be a red flag. That said, Oracle’s cash flow has been very resilient (even exceeding net income by 75–100% historically (^[5])), so this risk is about extreme scenarios. Still, investors should watch Oracle’s debt reduction progress – management’s pledge to slow buybacks until debt is cut is a positive sign of discipline (^[2]).

– Valuation & Market Sentiment: Oracle’s rich valuation itself introduces risk. At ~50x forward earnings, execution risk is high – any miss on growth or guidance can trigger an outsized stock reaction. The beta ~1.9 indicates Oracle’s stock is nearly twice as volatile as the market (^[7]). In late 2025, we saw how quickly sentiment can shift: despite stellar AI news, ORCL stock tumbled over 25% in weeks (^[1]) on profit-taking and macro jitters. For now, analysts remain bullish (around 20+ Buys vs <10 Holds (^[6])), but if the narrative sours, those targets could be cut. A related flag is insider selling – there have been some notable insider stock sales (over 120,000 shares sold by insiders in a recent quarter) (^[7]) while the stock was near highs. While not alarming given Oracle’s size, it’s something to monitor regarding management’s internal confidence.

– Integration & Strategic Risks: Oracle’s expansion into healthcare via Cerner (Oracle Health) and its AI alliances (with NVIDIA, Cohere, etc.) pose integration challenges. Investors will want to see that Oracle can successfully cross-sell cloud services to Cerner’s hospital clients and modernize that software suite – a process that takes time and comes with risk of cost overruns or cultural clash. Additionally, Oracle’s AI strategy leans on being a provider of infrastructure (OCI GPU instances) and also embedding AI features into its applications (Fusion ERP with AI, Database 23c AI features, etc.). Open question: Can Oracle truly innovate in AI software (an area outside its traditional forte) to differentiate its apps against Salesforce, Workday, and others? The company’s track record in organic innovation vs. acquisition-led growth will be tested in this fast-moving field.

Conclusion 📝

Mizuho’s bold bull case for Oracle – predicated on the idea that the recent gains are “just getting started” – centers on Oracle’s emergence as a critical player in the AI-driven cloud infrastructure arena. There is substance behind the optimism: Oracle is posting stronger growth, has a swelling backlog of cloud commitments, and is guiding to an aggressive 40%+ cloud revenue jump in FY2026 (^[1]). Even Oracle’s longtime skeptics concede the company has successfully reinvented portions of its business. The stock’s powerful rally in 2023–25 has been a testament to that narrative shift.

However, Oracle is not without challenges: its valuation assumes that Larry Ellison and Safra Catz will navigate a perfect execution of their 2030 vision. To truly justify the bulls, Oracle must scale its cloud profitably, maintain competitive technology, and deleverage over time – all while keeping shareholders rewarded. The next few quarters will be key litmus tests, as Oracle reports its progress on AI cloud deals and whether cloud margins begin trending up. For now, Oracle appears best suited for long-term growth investors who share Mizuho’s conviction in the AI/cloud roadmap and can tolerate volatility (^[1]). More conservative investors may prefer to wait for a better entry or clearer proof of profitability improvements.

In summary, Oracle today offers a compelling but complex story: a legacy tech giant aggressively transforming to seize a generational opportunity in AI. Mizuho’s bullish call captures the excitement around that opportunity. Yet, prudent analysis also flags the risks of high expectations and execution hurdles ahead. Investors should stay grounded in the fundamentals – watching cash flows, debt, and competitive wins – even as Oracle reaches for new heights. The coming years will reveal whether Oracle can turn bold promises into durable profits, validating the bulls and delivering the gains that are, perhaps, just getting started. (^[1]) (^[7])

Sources

For informational purposes only; not investment advice.