Oracle is upgraded from Avoid to Watchlist. The investment score rises from 47 to 54. Shares closed Friday at $150.85, some 4.5% above the level at which the last report was written, but the price is not what moved the rating.

Q: The previous report was published on 5 August. What has changed since?

A: Very little in the world, and one thing in the analysis. That report argued Oracle’s adjusted earnings would grow only 5.5% in fiscal 2027 while revenue grew a third, and used that gap to call the forward multiple unjustified. The arithmetic was right and the base was wrong. Fiscal 2026 non-GAAP earnings of $7.63 a share included one-time gains from the sale of the Ampere chip business and of Bloom Energy warrants. Oracle’s own release footnotes the clean figure at $6.83 and states that its $8.05 fiscal 2027 guidance represents growth of 18%. Like for like, earnings are compounding at 17.9%, not 5.5%.

Q: Does that make the stock cheap?

A: It makes it ordinary. At $150.85 Oracle trades on 18.7 times guided fiscal 2027 earnings for roughly 18% growth, a growth-adjusted multiple near 1.05. That is a discount to enterprise software peers, and the discount is deserved given the balance sheet. It is not the mispricing the previous report described.

Q: What about the cash burn that drove the downgrade?

A: Still there. Consensus points to negative free cash flow near $47.7 billion in fiscal 2027, on top of the $23.7 billion already spent. Two disclosures soften it. The prepaid and customer-supplied hardware portions of Oracle’s large AI contracts now total $75 billion, capital the company does not have to raise. And the funding plan is specified: roughly $40 billion of debt and equity in fiscal 2027, including a $20 billion at-the-market issuance, with no further debt planned this calendar year.

Q: So why stop at Watchlist?

A: Credit has not moved. S&P holds Oracle at BBB−, one notch above speculative grade, and the Moody’s outlook remains negative. The five-year credit default swap trades near 200 basis points, close to an eighteen-year high, against roughly 78 at Nvidia and 93 at Meta. Oracle has also published no breakdown of its $638 billion backlog by customer, leaving the concentration in OpenAI unsized. A probability-weighted fair value of $158 against $150.85 offers about 5% for a three-in-ten chance of losing more than 40%.

First-quarter results on 8 September should settle whether gross margin is holding near 60%. Scenario detail and the full monitoring thresholds are set out in the complete Oracle Corporation (ORCL) report on our Reports page.