Oracle: If the expansion of the AI data center is not optimistic, what is the value of Oracle?

Mark L. Moerdler, Ph.D.+1 917 344 8506Firoz Valliji, CFA+1 917 344 8316 Global Software Oracle Corp Price Target 313.00 USD Oracle: What is Oracle worth if you don't believe in the AIdatacenter build-out Close Date10 Feb 2026ORCL Close Price (USD)159.89Price Target (USD)313.00Upside/(Downside)96%52-Week Range345.72/118.86SPX6,941.81FYEMayDiv Yield1.3%Market Cap (USD) (M)459,385EV (USD) (M)564,511 initially very positive about the value being created from contracts with OpenAI and others but then turned negative as they were concerned about the impact on FCF, cash and marginsand the OpenAI customer concentration risk. We are writing a series of notes focused onthe issues and this note focuses on what Oracle would be worth today if the AI datacentercontracts were all to be canceled today. We estimate that ex-AI datacenters, Oracle’s stock While we believe that these contracts will drive substantial value for the company andinvestors, we understand why numerous clients have asked us what the downside could be in the worst case condition where the deals do not drive revenueWe have also updated our Oracle 5 & 10 year scenarios incorporating the additional revenue and CAPEX guide. Note that while we did not explicitly show ~$250B in datacenter leases inour initial work, we had incorporated the equivalent annualized datacenter leases. reiterate our OutPerform rating but look for additional details as well as increased confidencein OpenAI’s business.Investment Implications Oracle (ORCL, TP $313, OutPerform): We see the downside risks associated with therecently announced AI datacenter contracts as quite limited and while we do not believe this ‘doomsday’ scenario, we think that investors need to understand the limited downside risk as compared to the substantial upside opportunity. Given how much more the story is skewed to reward over risk we reiterate our OutPerform. VALUATION COMPS TABLE Table Of Contents Portfolio Managers Summary.............................................................................................................................................................................................. 3What is the worst case scenario for Oracle’s AI datacenter contracts?...............................................................................................................6What about the datacenter leases signed?.............................................................................................................................................................7What about Oracle’s commitment to AI hardware and GPUs?........................................................................................................................ 7Updating our base (with AI revenue) case based on latest management guidance.........................................................................................8gross margin.............................................................................................................................................................................................................................. 9What is Oracle ex-AI worth?..............................................................................................................................................................................................10What is core Oracle (ex-AI) worth?..........................................................................................................................................................................11 DETAILS The Oracle thesis has changed substantially over the last 12 months as Oracle signed multiple large multi-year AI datacenterusage contracts with the initial investor exuberance driving the stock up and then concerns about the impact on Oracle’sfinancials and customer concentration driving the stock down even more. With the stock currently trading meaningfullybelow what it traded at prior to the announcement of $317B in new RPO (driven by the big contract with OpenAI) in-boundvolumes are high. But investors are having difficulty in understanding and valuing the business and the ramifications of different Oracle controversy, to make the discussions more contained and more easily digestible. Earlier this week we published a notewith our updated company model, discussing the $45B-50B debt / equity raise and its impact on cash (Oracle: What will be thefinancial impact of the capital raise?). Today’s note takes an ‘almost’ worst case scenario approach and discusses how much Oracle would be worth if all the AI contracts signed since 4Q FY25 do not materialize. In other words: “What is Oracle worth ex OpenAI and the other new trainingcontracts (e.g. Meta etc.)?” the interest expenses from the debt and convertible debt raise. We are also not giving any value to the inventory build up that isoccurring as Oracle builds in preparation for adding Cloud capacity for AI and non-AI workloads.The answer, we estimate is $137