AI is stimulating a "backend management system" super cycle: first SAP, now Oracle.

The latest financial report from Oracle shows a significant acceleration in its cloud application business, with analysts from Morgan Stanley believing that this breakthrough performance indicates that the super cycle of AI-driven backend office system upgrades is expanding from the SAP ecosystem to a broader market. According to Wind Trading Platform news, Morgan Stanley's research report on June 12 stated that AI is becoming the core catalyst for ERP cloud migration. Research shows that 48% of respondents explicitly stated that utilizing AI capabilities is an important catalyst for upgrading ERP platforms to the cloud, second only to "digital transformation" (82%) and "improving operational efficiency/cost savings" (61%). Oracle's latest earnings report for the fourth quarter of fiscal year 2025 is a strong validation of this trend. Previously reported by Wall Street News, Oracle delivered better-than-expected results in the fourth quarter of fiscal year 2025, especially in the SaaS cloud application sector. Its core cloud applications (Fusion ERP and NetSuite) experienced significant acceleration in growth, and management expects this momentum to continue into fiscal year 2026. The core catalyst for this accelerated growth is that companies are migrating from on-premises software to the cloud in order to utilize AI capabilities. This trend not only benefits Oracle itself, but more importantly, it brings incremental demand to the entire "CFO office software" ecosystem. With more companies moving to ERP cloud, the demand for related services is also increasing. Therefore, Morgan Stanley has reiterated its "overweight" rating for companies like BlackLine, OneStream, and Vertex, with Vertex being seen as the most direct beneficiary due to its close market partnership with Oracle. Oracle's performance shows strong recovery, with significant acceleration in cloud application growth Oracle's performance in the fourth quarter of fiscal year 2025 exceeded expectations, particularly in its SaaS cloud applications. Fusion ERP's year-on-year growth accelerated from 18% to 22%, an increase of 4 percentage points; NetSuite ERP's year-on-year growth increased from 17% to 18%, an increase of 1 percentage point. Management expects the growth rate of cloud applications to further accelerate in fiscal year 2026. Oracle CEO Safra Catz stated in the earnings call: Our strategic SaaS products are growing rapidly. Customers are beginning to realize that they can only use AI capabilities by migrating to the cloud. Many customers are still using on-premises ERP products that cannot truly utilize advanced intelligent agents and AI capabilities. If you want to use these features for automation, do more things, and reduce expenditure, you must migrate to Fusion or NetSuite. AI becomes the core catalyst for enterprise ERP upgrades The report emphasizes that the previously observed "backend office super cycle" focused mainly on SAP, as SAP has set a clear deadline of 2027 to end support for on-premises products, actively encouraging customer migration. Oracle, historically, has not adopted such an aggressive strategy. However, Oracle's latest performance indicates that the wave of ERP migration to the cloud is surpassing the SAP ecosystem and expanding to a broader market. This signals an important "turning point" for the entire industry. The focus on "ERP upgrades" by companies is also increasing, as evidenced by the increasing mentions of "ERP Update" during company earnings conference calls. Morgan Stanley emphasizes that this trend brings incremental demand to companies providing professional services to the "CFO office" sector, as these services (such as financial consolidation automation, tax compliance, etc.) are deeply connected to ERP cloud migration projects. This strengthens Morgan Stanley's confidence in its "overweight" rating for BlackLine, OneStream, and Vertex: Vertex: Has a close market promotion relationship with Oracle. Companies upgrading to Oracle cloud ERP are likely to choose Vertex's tax solutions at the same time. The target price of Vertex is based on a 30 times multiple of 2029 fiscal year free cash flow (adjusted for growth 0.7 times), discounted by a 12.4% weighted average cost of capital. BlackLine: Maintains an "overweight" rating, with its valuation logic based on an 18 times multiple of expected free cash flow (FCF) in 2029 market sales rate (EV/FCF) and discounted by a 12.5% weighted average cost of capital (WACC). OneStream: Also has an "overweight" rating, with a target price of $27. This target price is based on a 9 times multiple of expected sales in 2026 (EV/Sales), or 0.5 times adjusted for growth, consistent with industry peer levels. As emphasized by analysts, AI is reshaping the enterprise software market landscape. Oracle's strong recovery is not only a victory for itself, but also heralds a new growth cycle for "backend management systems". This article is excerpted from "Wall Street News", author Baoyilong; GMTEight Editor: Song Zhiying.