11:44 AM EDT, 03/11/2025 (MT Newswires) -- Oracle (ORCL) reported "solid" fiscal Q3 results, though they were affected by unfavorable foreign exchange fluctuations, with operating margin set to compress over the next two fiscal years, more meaningfully in fiscal 2026, to support Oracle Cloud Infrastructure growth, Oppenheimer said in a note Tuesday.

Analysts, including Brian Schwartz, said the company has guided lower operating margins for fiscal year 2026 and fiscal year 2027 compared to fiscal year 2025, which aligns with comments made at last year's investor meeting. However, this guidance is below analysts' expectations.

For the fiscal Q4, Oracle's revenue and earnings per share guidance fell short of consensus estimates, partly due to negative foreign exchange impacts.

In fiscal Q3, Oracle's pro forma operating margin was 43.8%, a 23 basis point increase year-over-year, which was 40 basis points higher than consensus estimates. However, this margin expansion was slower than the 58 basis point increase seen in the previous quarter.

"Oracle's fiscal Q3 results show a good business momentum and the near- and medium-term outlooks, which project top-line growth acceleration, give investors something to look forward to, but amidst a heavy investment cycle (that is, a lower operating margin profile) than fiscal 2025," the analysts said.

The firm noted that while Oracle is positioned to benefit from long-term trends in cloud computing, generative AI, and data management, its cash efficiency model is below that of its large-cap software peers, as it continues to invest heavily in capital expenditures to compete with and surpass larger hyperscalers.

As a result, the risk/reward on the stock appears balanced, according to the note.

Oppenheimer maintained its perform rating on the stock "solely on valuation."

Shares of Oracle fell nearly 5% in recent trading activity.

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