Company DCF analysis file
Oracle DCF Analysis
Oracle’s DCF must explain how new cloud capacity is funded before it assumes the cash return from that capacity. Accounting profit, customer prepayments and external financing are different sources of information. The annual cost and cash bridges below make the funding gap and the risk of counting a customer prepayment twice visible.
Compare the delivery cost base with the complete fiscal-year revenue
Fiscal years ended May 31, 2025 and May 31, 2026; issuer condensed consolidated GAAP results, unaudited. Amounts use the monetary scale stated in each table caption. Source: annual financial statements. Reported lines retain the issuer’s scope; derived ratios use the displayed denominators.
| Measure | FY2025 | FY2026 |
|---|---|---|
| Revenue | 57,399 | 67,357 |
| Cloud / software delivery costs | 11,569 | 17,597 |
| Hardware costs | 782 | 868 |
| Services costs | 4,576 | 4,556 |
| Sales / marketing | 8,651 | 8,331 |
| R&D | 9,860 | 10,272 |
| General / administrative | 1,602 | 1,618 |
| Intangible amortization | 2,307 | 1,671 |
| Restructuring / other | 374 | 1,838 |
| Operating income | 17,678 | 20,606 |
| Net income | 12,443 | 17,087 |
| Operating margin: derived | 30.8% | 30.6% |
Retain the delivery costs of cloud capacity alongside research, sales support and corporate expense. The operating cost base does not disappear when an infrastructure payment is capitalized. Capitalizing an asset changes the timing between investment cash and expense recognition; it does not establish its return.
Project infrastructure capacity, commissioning, utilization and customer collections separately. A contracted service backlog still requires delivery capacity and operating cost. It is not a substitute for revenue recognition, collected cash or the financing bridge needed before that cash arrives.
Separate four revenue streams before imposing a group margin
The same annual results release supplies the following revenue categories. They are different from the quarter-only table in that release.
| Category | Revenue |
|---|---|
| Cloud | 33,989 |
| Software | 24,541 |
| Hardware | 3,084 |
| Services | 5,743 |
| Consolidated | 67,357 |
Build growth and delivery economics by category. An expanding infrastructure mix can require more funding before collection than an established software-support stream. Applying the mature mix’s cash margin to every new cloud contract would hide the capacity and working-capital assumptions.
Trace earnings into cash and reinvestment
Reconciliation source: annual earnings and cash-flow statements. Subtotals below are checkpoints, not extra amounts to add. Grouped adjustments are calculated from the disclosed cash-flow lines.
| Step | FY2026 |
|---|---|
| Operating income | 20,606 |
| Net interest / nonoperating / tax bridge | -3,519 |
| Net income: subtotal | 17,087 |
| Depreciation + intangible amortization | 9,294 |
| Other non-cash / reconciliation | 1,461 |
| Other operating assets / liabilities | -457 |
| Customer prepayments: financing component | 4,592 |
| Operating cash: subtotal | 31,977 |
| Capital expenditures | -55,663 |
| Cash after capex | -23,686 |
The customer-prepayment row is already within reported operating cash. Other reconciliation combines deferred tax, share compensation and investment gains; the other operating-balance group includes ordinary deferred revenue as well as receivables and payables. Neither the prepayment nor a share-based funding source is the same as earned operating margin.
The release also presents net cash outlay for capex of $47,726 million: $55,663 million less $3,345 million of related short-term financing and $4,592 million of customer prepayments. That financing-oriented measure is not the same deduction as gross capex. Subtracting it from operating cash that already includes the customer prepayment would count that inflow twice.
Stress the recurrence of customer funding separately from revenue
Illustration: remove a repeat of the displayed $4,592 million customer-prepayment inflow, holding all other operating cash movements and capex fixed. This is a funding-timing stress, not a normalized cash forecast or a claim that existing customer obligations vanish.
| Measure | Historical basis | Illustrative case |
|---|---|---|
| Operating cash | 31,977 | 27,385 |
| Gross capex | 55,663 | 55,663 |
| Cash after gross capex | -23,686 | -28,278 |
The funding gap widens by the same $4,592 million. A complete multi-year case must retain the future service obligation associated with customer funding, the associated operating costs and the external financing needed for any remaining gap. A positive income statement alone cannot settle that funding question.
Keep interim reporting separate from the annual basis
Q1 FY2027 covers 2026-06-01 through 2026-08-31 and was released 2026-09-10. Revenue was $19,345 million in this quarter. Source: official Q1 FY2027 results.
The newer quarter’s remaining performance obligations, customer funding and equity financing are distinct from earned revenue. Roll the annual investment and funding schedules forward rather than using the contract stock as cash or annualizing one quarter’s capacity economics.
Turn the financial basis into a DCF case
| Decision | Treatment |
|---|---|
| Operating case | Forecast cloud and established software contribution with their own delivery costs and support needs. |
| Investment | Use gross capex or a clearly reconciled financing convention; do not mix definitions. |
| Customer funding | Track prepayments and future performance together, recognizing that the inflow already affects CFO. |
| Enterprise cash | Apply explicit operating tax and reconcile non-cash costs, reinvestment and operating funding before discounting. |
| Equity bridge | Reconcile valuation-date debt, preferred/common claims, available cash and dilution without counting financing proceeds as operating value. |
A terminal case must contain the reinvestment and delivery costs needed by the assumed cloud revenue base. If the forecast starts from reported operating cash, reconcile financing and tax effects before calling it unlevered enterprise cash. Preserve the customer-funding and capacity-payment timetable throughout the discounting model rather than only in the first year.
The Oracle company analysis explains the wider operating context. Use the company forecast tool and DCF calculator with explicit assumptions. Use the historical financials to define an explicit operating and reinvestment case, then supply valuation-date capital costs, claims and diluted shares. Check that each cash claim is counted once before deriving a per-share value.
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