Analysts revise up anything and everything they thought about Oracle
After the company’s bombshell earnings this week, Wall Street thinks Oracle’s trajectory has changed.
As the week’s trading comes to a close, Oracle’s earnings bombshell continues to be digested by Wall Street, with analysts writing up a range of estimates for the company over the coming years.
Over the last day alone, JPMorgan equity analysts upped their price target for the stock, lifting it to $270 from a relatively low $210. (That’s still a pretty big undershoot of the current consensus of nearly $330, which implies a nearly 13% gain for the stock over the next 12 to 18 months.)
Analysts at Bernstein Research, on the other hand, lifted their price target on the stock to $363 from $308, citing an “exceptional growth trajectory” for the company’s cloud business. And Barclays analysts upgraded their target to $347 from $281.
“We still sense that many investors are not fully aligned with the notion that Oracle will be a main AI beneficiary and hence, expect ongoing upside momentum for the name,” Barclays analysts wrote.
But from the looks of rising estimates across a number of metrics, Oracle has made considerable progress this week in changing its image among the investing public from an incredibly profitable — but dull as dishwater — cloud computing and business software behemoth to a major player in the AI revolution.
Following on the massive build in the company’s key RPO metric — essentially booked orders that haven’t yet turned into actual sales dollars — disclosed during the company’s results, analysts have ratcheted up their estimates of sales growth over the coming years.
They now see annual sales returning to the remarkable level of more than 40% by fiscal 2028. (It has been almost 30 years since Oracle sales growth cracked 40%, which it did in fiscal 1996.)
Earnings per share are also expected to notch records over the next three fiscal years as well, with year-over-year growth climbing to 13%, 18%, and 36% by fiscal 2028.
To be sure, it should be stressed that these are, after all, estimates — statistical expressions of the conventional wisdom on Wall Street.
That conventional wisdom could be on the money. Or untidy elements of reality could intervene and make this story a lot messier.
For instance, in order to collect its many billions in backlogged RPO sales the company announced this week, Oracle will have to invest billions and billions of dollars to build out the data infrastructure it needs to provide services to customers like OpenAI.
And in the near term, that’s going to eat up a flood of sales dollars coming through the door, something that Wall Street estimates also captured this week.
In Oracle’s post-earnings conference call with analysts, company CEO Safra Catz explained elegantly how interrelated the company’s capital expenditure plans are with its RPO order backlog:
“Given our RPO growth, I now expect fiscal year 2026 CapEx will be around $35 billion. As a reminder, the vast majority of our CapEx investments are for revenue-generating equipment that is going into the data centers and not from land or buildings. As we bring more capacity online, we will convert the large RPO backlog into accelerating revenue and profit growth.”
Sounds like a good plan. And judging by the share price move this week and the follow-on upgrades to Wall Street price targets and earnings and sales estimates, people think it’s likely to work.
But the history of massive investment booms — from the emergence of railroads, to Japanese real estate, to the dot-com boom and the US housing bust — suggests there is plenty of scope for these things not to go exactly as everybody expects. But for now, the party continues.
