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On Tuesday, Cantor Fitzgerald analyst Thomas Blakey revised the price target for Oracle (NYSE:ORCL) shares, reducing it to $175 from the previous $214, while maintaining an Overweight rating on the company. The adjustment follows Oracle’s report of a slight revenue miss in its fiscal third quarter of 2025, with adjusted earnings per share (EPS) meeting expectations and free cash flow (FCF) falling significantly short of forecasts. Currently trading at $140.35, Oracle’s stock has declined 10.49% year-to-date, though according to InvestingPro analysis, the stock is currently fairly valued based on its comprehensive Fair Value model.
The revenue shortfall was attributed primarily to the company’s Software (ETR:SOWGn) as a Service (SaaS) segment, while the Oracle Cloud Infrastructure (OCI) performed as anticipated. Looking ahead, Oracle’s management has reduced its fiscal fourth quarter 2025 forecasts, citing supply constraints and unique customer-related pressures, including issues with TikTok. However, these challenges are expected to be resolved by the first quarter of fiscal year 2026, which ends in May. Despite these near-term challenges, InvestingPro data shows Oracle maintains strong fundamentals with a 71.26% gross profit margin and an overall "GOOD" financial health rating. The company has also demonstrated its commitment to shareholders by maintaining dividend payments for 17 consecutive years.
Despite the reduced revenue outlook, Oracle’s bookings were notably strong and were not concentrated in a few deals, nor influenced by Stargate contracts. The analyst predicts that capital expenditure-related bookings will surge in fiscal years 2026 and 2027, substantially exceeding both the Street’s and Cantor’s projections. This increase in bookings is anticipated to place pressure on gross margins and, consequently, EBIT margins in fiscal year 2026 before potentially stabilizing in 2027. Recent financial data from InvestingPro shows Oracle achieved 6.4% revenue growth in the last twelve months, with total revenue reaching $54.93 billion. For deeper insights into Oracle’s financial metrics and growth potential, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
Oracle’s growth trajectory is expected to be positively influenced by its acceleration in the OCI business, particularly through the integration of artificial intelligence (AI). The company’s top-line growth, driven by OCI and AI, coupled with a slower operational expenditure increase relative to total revenue growth, is projected to help mitigate the impact of gross margin pressures. Blakey notes that the forecast for fiscal year 2026 EPS has been lowered by 5%, while the fiscal year 2027 projection remains largely unchanged.
The reduction in the price target to $175 is based on a lower enterprise value to revenue (EV/R) multiple of 8 times, down from 8.5 times. This new valuation takes into account the heightened execution risks associated with increased capital expenditures, supply chain issues, and reliance on training revenues in the near term, as well as a downward adjustment in near-term free cash flow forecasts. Despite these concerns, the analyst believes that the risks are already adequately reflected in Oracle’s current share price, and maintains a favorable risk/reward outlook. The analyst also emphasizes the potential for accelerated growth in Oracle’s core OCI segment driven by AI, which supports the Overweight rating. Current market data shows Oracle trading at an EV/EBITDA multiple of 21.99x and a P/E ratio of 33.53x, with analyst price targets ranging from $130 to $227.
In other recent news, Oracle Corporation has been the focus of several analyst updates following its latest financial performance. Oracle reported an 8% revenue growth for the third quarter, falling short of its guidance range of 9-11%, which has led to various adjustments in price targets by analysts. Stifel lowered its price target for Oracle to $150, maintaining a Hold rating, due to lower-than-expected revenue performance and concerns about operating margins. Piper Sandler also reduced its price target to $190 but continues to recommend an Overweight rating, citing robust demand for Oracle’s AI infrastructure despite potential margin pressures.
TD Cowen maintained a Buy rating and a $210 price target, expressing confidence in Oracle’s significant Remaining Performance Obligations (RPO) growth and future revenue projections. UBS adjusted its price target to $200 while reiterating a Buy rating, highlighting Oracle’s strong deal backlog and optimistic growth outlook for fiscal year 2027. RBC Capital, however, lowered its target to $145, maintaining a Sector Perform rating due to concerns over capacity constraints impacting Oracle’s growth potential.
Oracle’s RPO saw a notable 63% year-over-year increase, with a quarterly rise of $33 billion, reflecting strong demand for its cloud services. Analysts also noted Oracle’s increased capital expenditure plans for the year, now set at $16 billion, up from $14 billion, as part of its strategic investments. The company’s future growth prospects are closely tied to the anticipated contributions from its new initiative, Stargate, which is expected to further elevate Oracle’s RPO by the end of fiscal year 2025.
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