Oracle: Understanding the long-term opportunity which should bear fruit soon

Oracle has been the most controversial stock in our coverage. It has also generated the largest amount of in-bound calls in our coverage as investors see the potentiality of the stock but are still working to understand the likelihood and timing. We update our 10-year Oracle model incorporating management's recent disclosures and guidance and show how much value management is creating. Two potential catalysts for the stock are on the horizon: the OpenAI IPO which will add significant clarity on OpenAI's and the larger Gen AI industry's ability to pay for the compute they have committed to, and Oracle's return to a FCF positive business by H2 FY28. Given more clarity on the economics of the business, ORCL is not going to require additional funding and is ~1.5 years away from FCF positive and then delivering increasingly strong FCF. We believe the upside potential far outweighs the downside risk.