D.A. Davidson’s senior analyst Gil Luria continues to see Oracle (NYSE: ORCL) as exceptionally cheap at about 25x forward earnings, despite an 8% rally after Q3 earnings late on Tuesday.
Oracle came in handily above Street estimates in its third financial quarter and cited solid artificial intelligence (AI) tailwinds as it guided for a better-than-expected $1.94 a share of earnings in Q4.
Following the post-earnings surge, Oracle stock is testing a key resistance coinciding with its 50-day moving average (MA), with a decisive break above $168 expected to boost upward momentum in the near-term.
Versus its year-to-date low in early February, ORCL is now up nearly 20%.
Why Oracle stock is super cheap to own in 2026
Luria sees Austin-headquartered Oracle as “undervalued” given its current price does not account for its massive $553 billion AI-driven Oracle Cloud Infrastructure (OCI) backlog.
At about $162, what’s baked in is the firm’s legacy software and baseline cloud operations, but its burgeoning artificial intelligence pipeline, he told CNBC, is getting “almost no credit” currently.
Meanwhile, neocloud rivals like CoreWeave and Nebius are trading at valuations exceeding “1x” their backlogs, the D.A. Davidson analyst added.
According to him, Q3 earnings confirm that Oracle can deploy its huge backlog while maintaining healthy margins – which means there’s significant untapped upside – as ORCL stock is essentially offering its AI future for free today.
Oracle just delivered what it’s been promising for years
For years, Oracle was viewed as a legacy giant trapped in low-to-mid-single-digit organic growth, leading many analysts to remain skeptical of its ambitious turnaround promises.
However, Gil Luria emphasizes that Q3 represents a watershed moment where the company finally “delivered on that promise.”
In the third quarter, ORCL saw its revenue grow by 20% on a year-over-year basis while protecting its profit margins as well – a feat that silenced skeptics who believed the company can not scale its OCI business without sacrificing profitability.
By proving it can accelerate growth while maintaining a high double-digit earnings growth rate – Oracle shares have transitioned from a stable, legacy name into a “high-growth” AI infrastructure powerhouse that’s fundamentally better than it looks on the surface.
For the D.A. Davidson analyst, margin was the single most important number in ORCL’s earnings that warrants buying its stock.
ORCL shares are insulated from AI disruption debate
Speaking with CNBC, the D.A. Davidson analyst addressed AI disruption fears as well, noting the “terminal value zero” debate misses a fundamental reality: software companies are best-positioned to harness AI’s power.
Because firms like Oracle employ vast armies of developers, they stand to gain the most from AI-driven productivity.
“Nobody is going to know how to use AI internally better than software companies,” Luria notes, suggesting that the ability to code more efficiently will unlock unprecedented operating leverage.
This makes ORCL shares even more attractive as this legacy giant is poised to use AI to streamline its own product development, potentially leading to a much leaner, more profitable organization.
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