Oracle CorporationORCLNYSE

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $444.44 per share(market-calibrated)

+197.8%

Upside to Fair Value

Current

$149.25

Pure Model

$464.14

Fair Value

$444.44

Bull Case

$813.22

Bear Case

$244.08

Market Reality Check

Model Terminal Growth

3.75%

Market-Implied Growth

0.50%

Calibrated Growth

2.61%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $464.14.

What's Driving This Ratingfor ORCL

↓

CapEx normalizing toward maintenance

Historical CapEx is 15.13% of revenue (heavy investment phase). Model fades this to 6.00% by Year 10, freeing up ~$34.9B in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 29.56% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.

↑

Strong near-term revenue growth

Analyst consensus projects 16.63% revenue growth in Year 1, fading to 22.40% by Year 5 and 3.75% by Year 10. Revenue reaches $382.3B by Year 10 (vs $57.4B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $303.57/share (16.6x terminal FCF) while exit multiple gives $624.70/share (38.6x terminal FCF). The 28x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.75% growth is more conservative. The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 325bps below the model's 3.75%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 72.59% indicates efficient cash generation. FCF reaches $105.7B by Year 10 (27.64% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.63

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)11.85%

Cost of Debt

Pre-tax Cost of Debt3.04%

Tax Rate12.13%

After-tax Cost of Debt2.68%

Equity Weight (E/V)79.99%

Debt Weight (D/V)20.01%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (79.99% × 11.85%) + (20.01% × 2.68%)

= 10.01%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$66.9B	$127.7B	$226.0B	$308.3B	$382.3B
EBIT	$19.8B	$37.8B	$66.8B	$91.1B	$113.0B
Tax	$2.4B	$4.6B	$8.1B	$11.0B	$13.7B
NOPAT	$17.4B	$33.2B	$58.7B	$80.1B	$99.3B
+ Depreciation	$5.7B	$10.9B	$19.3B	$26.3B	$32.6B
- Capex	$10.1B	$16.7B	$25.0B	$27.9B	$22.9B
- Δ NWC	$2.3B	$9.7B	$9.8B	$9.5B	$3.3B
Free Cash Flow	$10.7B	$17.6B	$43.2B	$69.0B	$105.7B
Discount Factor	0.909	0.751	0.621	0.513	0.385
Present Value	$9.7B	$13.2B	$26.8B	$35.4B	$40.7B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$105.7B

Terminal Growth Rate3.75%

WACC10.01%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$1.8T

PV of Terminal Value$674.1B

Exit Multiple Method

Year 10 EBITDA$145.6B

Exit Multiple (EV/EBITDA)28.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$4.1T

PV of Terminal Value$1.6T

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$265.9B

PV of Terminal Value$674.1B

Enterprise Value$940.0B

(-) Net Debt$93.3B

Equity Value$846.7B

Shares Outstanding2.8B

Price per Share$303.57

Exit Multiple Method

PV of Projected FCFs$265.9B

PV of Terminal Value$1.6T

Enterprise Value$1.8T

(-) Net Debt$93.3B

Equity Value$1.7T

Shares Outstanding2.8B

Price per Share$624.70

Pure Model Fair Value

$464.14

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.75%	3.25%	3.75%	4.25%	4.75%
8.01%	$583.75	$602.63	$625.94	$655.45	$693.99
9.01%	$507.41	$519.48	$533.85	$551.22	$572.68
10.01%	$446.49	$454.66	$464.14	$475.26	$488.49
11.01%	$396.18	$401.95	$408.51	$416.04	$424.77
12.01%	$353.64	$357.85	$362.56	$367.88	$373.93

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$244.08

63.5% vs current

• -25% vs analyst consensus
• Terminal growth: 3.3%
• Beta: 2.04

Base Case

$464.14

211.0% vs current

• Analyst consensus
• Terminal growth: 3.8%
• Beta: 1.63

Bull Case

$813.22

444.9% vs current

• +25% vs analyst consensus
• Terminal growth: 4.3%
• Beta: 1.39

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Technology Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth16.63%

Year 3 Revenue Growth47.39%

Year 5 Revenue Growth22.40%

Year 7 Revenue Growth14.94%

Year 10 Revenue Growth3.75%

Terminal Growth Rate3.75%

Margin & Efficiency

Current EBIT Margin29.56%

Terminal EBIT Margin30.80%

Tax Rate12.13%

Historical Capex / Rev15.13%

Terminal Capex / Rev6.00%

NWC / Revenue23.60%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 28x EV/EBITDA (Technology sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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