Piper Sandler maintained its Overweight recommendation on Oracle and outlined an upside scenario for Oracle Cloud Infrastructure (OCI) revenue that it says is not fully captured by consensus forecasts. The firm told clients that converting Oracle's projected capital expenditure into data-center capacity and then into revenue produces a potential incremental OCI revenue figure of about $2.2 billion.
Analyst Billy Fitzsimmons framed Oracle as a name that continues to generate debate within the firm's coverage, citing persistent market concerns around capital requirements, AI monetization, customer concentration and margins. Despite those headwinds, Piper Sandler said it remains constructive thanks to its OCI-focused modeling, signs of accelerating revenue growth, the prospect of a more conservative financial guidance approach from Oracle's new chief financial officer, and tempered expectations for the applications business in fiscal 2027.
The firm based its modeling on disclosure data from Crusoe and CoreWeave, using those peers as benchmarks to estimate the economics of cloud capacity. Piper Sandler applied a baseline capital cost of about $46 million per megawatt and estimated IaaS revenue at approximately $13.5 million per megawatt.
Applying those per-megawatt assumptions to Oracle's projected fiscal 2027 capital spending, the firm calculated that roughly 2,400 megawatts of capacity could come online during the year. Factoring in a capacity ramp across fiscal 2027, Piper Sandler estimated net new OCI revenue of about $23.0 billion for the period, versus the firm's prior OCI estimate of $20.8 billion. That produces an implied total OCI revenue figure for fiscal 2027 of $41.1 billion under the modeled scenario.
Fitzsimmons summarized the incremental contribution from the capacity-to-revenue analysis as a 12% tailwind to FY27 OCI growth. The note also pointed to Oracle shares having pulled back after fourth-quarter results, a move Piper Sandler characterized as creating an opportunity given the upside the firm's analysis supports.
In its client communication, the firm acknowledged the controversies surrounding Oracle but emphasized that the specific capacity and revenue conversion assumptions drive the upside case. The analysis rests on converting projected capital expenditure into data-center megawatts and then estimating revenue per megawatt using the disclosed benchmarks.
What Piper Sandler did
- Used Crusoe and CoreWeave disclosures as benchmarks to set a base cost of about $46 million per megawatt and IaaS revenue of about $13.5 million per megawatt.
- Applied those assumptions to Oracle's projected fiscal 2027 capex to estimate roughly 2,400 megawatts of capacity coming online.
- Calculated net new OCI revenue of about $23.0 billion versus a prior estimate of $20.8 billion, implying total fiscal 2027 OCI revenue near $41.1 billion and representing a 12% tailwind to OCI growth.